IDEAS home Printed from https://ideas.repec.org/p/ias/cpaper/93-wp106.html
   My bibliography  Save this paper

Short-Run Behavior of Forward-Looking Firms, The

Author

Abstract

A theory of short-run competitive firm behavior allowing for nonmyopic risk aversion, randomness in input and output prices, as well as forward trading and storage of final good and material input is introduced. If the firm is a forward looking risk-averse expected-utility maximizer, separation of production and storage from hedging decisions is obtained. Production and storage are shown to depend only upon forward and cash prices and to be independent of the agent's degree of risk aversion and the distribution of random prices. Comparative statics are derived regarding production, purchases, and sales. The hypotheses advanced are tested empirically with monthly data pertaining to the U.S. soybean-processing industry. The results support the model and suggest that in stationary equilibrium futures prices of the soybean complex have had little influence on crushings or production, but they have been important determinants of inventory levels. Both theoretical and empirical results indicate that short-run firm behavior is more complex than is generally assumed in the literature. They also suggest long-term firm behavior can be better understood by studying its short-term behavior rather than using the medium- to long-run models that are currently available.

Suggested Citation

  • Sergio H. Lence & Dermot J. Hayes & William H. Meyers, 1993. "Short-Run Behavior of Forward-Looking Firms, The," Center for Agricultural and Rural Development (CARD) Publications 93-wp106, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:93-wp106
    as

    Download full text from publisher

    File URL: https://www.card.iastate.edu/products/publications/pdf/93wp106.pdf
    File Function: Full Text
    Download Restriction: no

    File URL: https://www.card.iastate.edu/products/publications/synopsis/?p=608
    File Function: Online Synopsis
    Download Restriction: no

    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:ias:cpaper:93-wp106. 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: (). General contact details of provider: http://edirc.repec.org/data/caiasus.html .

    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.

    We have no references for this item. You can help adding them by using 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.