Input Demand Under Joint Energy and Output Prices Uncertainties
Moawia Alghalith (),
Xu Guo (),
Cuizhen Niu and
Wing-Keung Wong ()
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Moawia Alghalith: Department of Economics, UWI, St. Augustine, Trinidad
Cuizhen Niu: School of Statistics, Beijing Normal University, No. 19 Xinjiekou Wai Street, Haidian District, Beijing, P. R. China
Asia-Pacific Journal of Operational Research (APJOR), 2017, vol. 34, issue 04, 1-12
In this paper, we analyze the impacts of joint energy and output prices uncertainties on the input demands in a mean–variance framework. We find that an increase in expected output price will surely cause the risk-averse firm to increase the input demand, while an increase in expected energy price will surely cause the risk-averse firm to decrease the demand for energy, but increase the demand for the non-risky inputs. Furthermore, we investigate the two cases with only uncertain energy price and only uncertain output price. In the case with only uncertain energy price, we find that the uncertain energy price has no impact on the demands for the non-risky inputs. We also show that the concepts of elasticity and decreasing absolute risk aversion (DARA) play an important role in the comparative statics analysis.
Keywords: Price uncertainty; mean–variance; energy price; risk; utility (search for similar items in EconPapers)
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Working Paper: Input Demand under Joint Energy and Output Prices Uncertainties (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:apjorx:v:34:y:2017:i:04:n:s021759591750018x
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