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Duality, income and substitution effects for the competitive firm under price uncertainty

✍ Scribed by Carmen F. Menezes; X. Henry Wang

Publisher: John Wiley and Sons
Year: 2005
Tongue: English
Weight: 172 KB
Volume: 26
Category: Article
ISSN: 0143-6570
DOI: 10.1002/mde.1217

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✦ Synopsis

This paper uses duality theory to decompose the total effect on the competitive firm's output of an increase in the riskiness of output price into income and substitution effects. Properties of preferences that control the sign of each effect are identified. The analysis extends to the general class of quasi-linear decision models in which the payoff is linear in the random variable.

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