Theory of the firm facing uncertain demand revisited

Arthur Hau ()

Economic Theory, 2004, vol. 24, issue 2, 457-464

Abstract: Empirical evidence shows that the Principle of Increasing Uncertainty ( PIU) introduced by Leland is easily violated. Necessary and sufficient conditions, without relying on the PIU assumption, under which risk-averse monopolistic producers reduce their output levels upon the introduction of the Leland-type demand uncertainty are derived. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Quantity-setting monopolistic firm; Principle of increasing uncertainty; Leland-type demand uncertainty; Single-crossing property (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00199-003-0417-9

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