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Price Stabilization and the Risk‐Averse Firm
Author(s) -
Chambers Robert G.,
Quiggin John
Publication year - 2003
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/1467-8276.00123
Subject(s) - economics , welfare , simple (philosophy) , microeconomics , risk neutral , risk aversion (psychology) , mathematical economics , expected utility hypothesis , philosophy , epistemology , market economy
An analytically simple and tractable approach to firm‐level welfare analysis of complete and partial mean‐preserving price stabilization for producers with general risk‐averse preferences facing a stochastic technology is developed. Necessary and sufficient conditions for price stabilization to be welfare enhancing are derived under different assumptions of the producer's preferences and the producer's technology. Existing stabilization results for the risk‐averse firm are shown to be corollaries of these more general results.