RISK ANALYSIS FOR PROPRIETORS WITH LIMITED LIABILITY: A MEAN- VARIANCE, SAFETY- FIRST SYNTHESIS

Robert A. Collins and Edward E. Gbur

Western Journal of Agricultural Economics, 1991, vol. 16, issue 01, 7

Abstract: Since nearly the entire U.S. output of agricultural commodities is produced by proprietors with limited liability, it is important to understand how limited liability affects decision in a risky environment. This article extends the work of Robinson and Barry; Robinson and Lev; and Robinson, Barry, and Burghart. It provides a rigorous derivation of one of their objective functions, compares it to standard risk analysis tools, and suggests several methods of empirical implementation. Under some conditions, utility maximization in the limited liability environment is consistent with optimization of Roy's safety-first criterion, while in other situations Freund's mean-variance criterion is appropriate. However, it is easy to demonstrate cases where neither criterion is applicable.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Date: 1991
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/32617/files/16010156.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:wjagec:32617

DOI: 10.22004/ag.econ.32617

Access Statistics for this article

More articles in Western Journal of Agricultural Economics from Western Agricultural Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().