Exchange of goods while investing into production and safety

Kjell Hausken

Operations Research and Decisions, 2013, vol. 23, issue 1, 29-35

Abstract: The tradeoff between production and safety investment is scrutinized for two agents who convert resources into production and safety investment while simultaneously exchanging goods voluntarily. We quantify how two Cobb–Douglas parameters, one scaling production versus safety, and the other scaling the relative importance of two goods, impact two agents’ production, safety effort, incomes, export, import, price, and utilities. An agent’s income from producing a good reaches a maximum for an intermediate value of the Cobb–Douglas parameter that scales the importance of productive effort relative to safety effort. The price of good 2 in terms of good 1, and the agents’ utilities depend on both the Cobb–Douglas parameters, the productivity parameter, and both agents’ resources and unit costs of production and safety effort.

Keywords: production; safety; exchange; risk; trade; price (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:wut:journl:v:1:y:2013:p:29-35:id:1052

DOI: 10.5277/ord130103

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