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A Note on Adjustment to Production Uncertainty and the Theory of the Firm


  • Booth, Laurence


This paper analyzes the impact of production uncertainty on the firm's optimal output decision. If uncertainty is introduced by an additive risk variable, then short-run optimal output is unchanged, but the owner-manager's expected utility can change causing long-run output effects. If uncertainty is introduced by a multiplicative random variable, then short-run output can change as well. Copyright 1990 by Oxford University Press.

Suggested Citation

  • Booth, Laurence, 1990. "A Note on Adjustment to Production Uncertainty and the Theory of the Firm," Economic Inquiry, Western Economic Association International, vol. 28(3), pages 616-621, July.
  • Handle: RePEc:oup:ecinqu:v:28:y:1990:i:3:p:616-21

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    References listed on IDEAS

    1. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
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    Cited by:

    1. Haim Shalit, 1995. "Mean-Gini analysis of stochastic externalities: The case of groundwater contamination," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(1), pages 37-52, July.

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