Overlooked results on the competitive firm under output price risk: Alternative sufficient conditions for downward sloping factor demand curves

Richard Watt

Economics Letters, 2020, vol. 196, issue C

Abstract: The existing literature on the competitive firm under output price risk has concluded that the demand for labor (and any other factor) will be a decreasing function of the price of that factor if the firm’s utility function for profit satisfies decreasing absolute risk aversion. Here I add two alternative sufficient conditions, both related to the size of relative risk aversion.

Keywords: Price risk; Competitive firms; Labor demand (search for similar items in EconPapers)
JEL-codes: D2 D8 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:196:y:2020:i:c:s0165176520303104

DOI: 10.1016/j.econlet.2020.109507

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