A Note on Adjustment to Production Uncertainty and the Theory of the Firm

Laurence Booth

Economic Inquiry, 1990, vol. 28, issue 3, 616-21

Abstract: This paper analyzes the impact of production uncertainty on the firm's optimal output decision. If uncertainty is introduced by an additive risk variable, then short-run optimal output is unchanged, but the owner-manager's expected utility can change causing long-run output effects. If uncertainty is introduced by a multiplicative random variable, then short-run output can change as well. Copyright 1990 by Oxford University Press.

Date: 1990
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