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A NOTE ON ADJUSTMENT TO PRODUCTION UNCERTAINTY AND THE THEORY OF THE FIRM
Author(s) -
Booth Laurence
Publication year - 1990
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.1465-7295.1990.tb01242.x
Subject(s) - multiplicative function , economics , production (economics) , variable (mathematics) , econometrics , short run , microeconomics , random variable , mathematical economics , mathematics , statistics , mathematical analysis
This paper analyzes the impact of production uncertainty on the firm's optimal output decision. If uncertainty is introduced by an additive risk variable, then short‐run optimal output is unchanged, but the owner‐manager's expected utility can change causing long‐run output effects. If uncertainty is introduced by a multiplicative random variable, then short‐run output can change as well.