The Demand for Inputs under Risk Aversion

Roger Latham

Working Paper from Economics Department, Queen's University

Abstract: This paper analyses a model where the firm is risk averse and there is ex post flexibility. First, a sufficient condition for a mean-preserving spread in the output price to reduce the optimal choice of ex ante input is obtained. Second, using mean-variance analysis, mean-preserving increases in riskiness reduce the optimal choice of ex ante input given that absolute risk aversion is a decreasing function of expected profits.

Pages: 13
Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:473

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