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Multi-output firm under price uncertainty

  • Hennessy, David A.

A closed-form dual representation of the multi-output production problem is developed under CARA and the large exponential family of multivariate price distributions. System-wide response analysis allows an understanding of second moment and risk tolerance effects, and provides insights on distorting subsidies admissible under World Trade Organization agreements. We demonstrate second-order flexibility in the sense that any empirical first and second moments can be imposed. Production complementarity results are identified for a special linearized version of the model. Incentives under the class of elliptically contoured distributions are studied, as are speculation decisions in the presence of futures markets.

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Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 58 (2006)
Issue (Month): 3 ()
Pages: 181-201

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Handle: RePEc:eee:jebusi:v:58:y:2006:i:3:p:181-201
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconbus

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  1. David A. Hennessy, 1998. "The Production Effects of Agricultural Income Support Policies under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 46-57.
  2. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
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  17. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1992. "Risk Management: Coordinating Corporate Investment and Financing Policies," NBER Working Papers 4084, National Bureau of Economic Research, Inc.
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