An Analogy between Risk Aversion and Homothetic Production under Certainty

Rulon D. Pope

American Journal of Agricultural Economics, 1987, vol. 69, issue 2, 378-381

Abstract: A key component in arguments about aggregation is the curvature of micro-decision functions. For example, a mean-preserving spread in the distribution of some parameter across economic agents will decrease aggregate response when each identical microfunction is concave in the parameter. Using this motivation, with the parameter being output price, curvature of derived demands and supplies is examined. Calculations analogous to the Arrow-Pratt absolute risk aversion measure and its slope are crucial in determining these results in many cases. This allows one to use known results in risk theory to simply characterize curvature.

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:69:y:1987:i:2:p:378-381.

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