Factor Price Stabilization and the Competitive Firm

Stephen Devadoss and Eun Choi

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper investigates the effects of factor price stabilization on production decisions of the competitive firm with "ex post" production flexibility. Factor price stabilization is achieved through changes in the guaranteed minimum price and the imposed maximum price. For the risk-averse firm, the effect of factor price stabilization, through a mean-preserving contraction, on capital crucially depends on whether capital and the variable input are substitutes or complements as well as the observable characteristics of the variable input demand curve.

Date: 1991-08-01
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Published in American Journal of Agricultural Economics, August 1991, vol. 73 no. 3, pp. 749-756

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:473

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