IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v26y2005i4p249-257.html
   My bibliography  Save this article

Duality, income and substitution effects for the competitive firm under price uncertainty

Author

Listed:
  • Carmen F. Menezes

    (Department of Economics, University of Missouri-Columbia, Columbia, MO 65211, USA)

  • X. Henry Wang

    (Department of Economics, University of Missouri-Columbia, Columbia, MO 65211, USA)

Abstract

This paper uses duality theory to decompose the total effect on the competitive firm's output of an increase in the riskiness of output price into income and substitution effects. Properties of preferences that control the sign of each effect are identified. The analysis extends to the general class of quasi-linear decision models in which the payoff is linear in the random variable. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Carmen F. Menezes & X. Henry Wang, 2005. "Duality, income and substitution effects for the competitive firm under price uncertainty," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 249-257.
  • Handle: RePEc:wly:mgtdec:v:26:y:2005:i:4:p:249-257
    DOI: 10.1002/mde.1217
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/mde.1217
    File Function: Link to full text; subscription required
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mirman, Leonard J, 1971. "Uncertainty and Optimal Consumption Decisions," Econometrica, Econometric Society, vol. 39(1), pages 179-185, January.
    2. Block, M K & Heineke, J M, 1973. "The Allocation of Effort under Uncertainty: The Case of Risk-averse Behavior," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 376-385, Part I, M.
    3. Batra, Raveendra N & Ullah, Aman, 1974. "Competitive Firm and the Theory of Input Demand under Price Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 537-548, May/June.
    4. David L. Hanson & Carmen F. Menezes, 1978. "The Effect of Capital Risk on Optimal Saving Decisions," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 653-670.
    5. Davis, George K, 1989. "Income and Substitution Effects for Mean-Preserving Spreads," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 131-136, February.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Eichner, 2010. "Slutzky equations and substitution effects of risks in terms of mean-variance preferences," Theory and Decision, Springer, vol. 69(1), pages 17-26, July.
    2. Eichner, Thomas, 2011. "Portfolio selection and duality under mean variance preferences," Insurance: Mathematics and Economics, Elsevier, vol. 48(1), pages 146-152, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:26:y:2005:i:4:p:249-257. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery) or (Christopher F. Baum). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.