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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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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers Archive with number 12408.

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Date of creation: 01 May 2006
Date of revision:
Publication status: Published in Journal of Economics and Business, May/June 2006, vol. 58, pp. 181-201
Handle: RePEc:isu:genres:12408
Contact details of provider: Postal:
Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. Susan Athey, 2002. "Monotone Comparative Statics under Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 187-223.
  2. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
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  8. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
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  13. Just, Richard E & Zilberman, David, 1986. "Does the Law of Supply Hold under Uncertainty?," Economic Journal, Royal Economic Society, vol. 96(382), pages 514-24, June.
  14. Arye L. Hillman & Eliakim Katz, 1986. "Domestic Uncertainty and Foreign Dumping," Canadian Journal of Economics, Canadian Economics Association, vol. 19(3), pages 403-16, August.
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  16. Berk, Jonathan B., 1997. "Necessary Conditions for the CAPM," Journal of Economic Theory, Elsevier, vol. 73(1), pages 245-257, March.
  17. Nehring, Klaus & Puppe, Clemens, 2004. "Modelling cost complementarities in terms of joint production," Journal of Economic Theory, Elsevier, vol. 118(2), pages 252-264, October.
  18. Newey, Whitney K & Stoker, Thomas M, 1993. "Efficiency of Weighted Average Derivative Estimators and Index Models," Econometrica, Econometric Society, vol. 61(5), pages 1199-223, September.
  19. Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, Junio.
  20. Li, Tong & Perrigne, Isabelle & Vuong, Quang, 2003. "Semiparametric Estimation of the Optimal Reserve Price in First-Price Auctions," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 53-64, January.
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