A note on the theory of the firm under multiple uncertainties

Moawia Alghalith

European Journal of Operational Research, 2016, vol. 251, issue 1, 341-343

Abstract: We develop a dynamic continuous-time theory of the competitive firm under multiple correlated uncertainties (output price uncertainty and output uncertainty as an example). In doing so, we completely generalize and extend the previous (one-period) comparative statics results (the marginal impact of each parameter on optimal output). Particularly, we relax the assumption of the statistical independence between the risks, and the restrictions on the coefficient of absolute/relative risk aversion. Furthermore, we generally show the impact of one risk on the aversion to another. Moreover, we show the role of the factor of correlation between risks on the decisions of the firm.

Keywords: Theory of the firm; Competitive firm; Comparative statics; Continuous-time dynamic; Correlated risks (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:251:y:2016:i:1:p:341-343

DOI: 10.1016/j.ejor.2015.12.003

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