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The Competitive Firm under both Input and output Price Uncertainties with Futures Markets and Basis Risks

Author

Listed:
  • Sevi, B.

Abstract

We study the case of a competitive firm exposed to both input and output price risk. In an expected utility framework, we elicit the separation theorem, and show the positive impact of derivatives markets on the optimal output. We also show that in the case of several inputs, the risk-averse firm accord a certainty premium to the most certain input.

Suggested Citation

  • Sevi, B., 2004. "The Competitive Firm under both Input and output Price Uncertainties with Futures Markets and Basis Risks," Cahiers du CREDEN (CREDEN Working Papers) 04.01.44, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
  • Handle: RePEc:mop:credwp:04.01.44
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    File URL: http://www.creden.univ-montp1.fr/downloads/cahiers/CC-04-01-44.pdf
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    More about this item

    Keywords

    UNCERTAINTY; RISK AVERSION; PRUDENCE; FUTURES MARKETS;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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