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COMPETITIVE INDUSTRY EQUILIBRIUM UNDER UNCERTAINTY AND FREE ENTRY
Author(s) -
Chavas JeanPaul,
Pope Rulon D.,
Leathers Howard
Publication year - 1988
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1988.tb01497.x
Subject(s) - economics , competitive equilibrium , microeconomics , partial equilibrium , free entry , general equilibrium theory , econometrics
This paper investigates the properties of industry equilibrium under price uncertainty given free entry and exit. For any form of risk‐averse behavior, it is shown that an increase in demand uncertainty (as measured by a mean‐preserving spread) increases mean output price and reduces output of firms in long‐run equilibrium.