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ADJUSTMENT TO PRODUCTION UNCERTAINTY AND THE THEORY OF THE FIRM: A COMMENT
Author(s) -
Schmidt Torsten,
Tressler John
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.tb01243.x
Subject(s) - certainty , economics , ex ante , simple (philosophy) , production (economics) , microeconomics , theory of the firm , mathematical economics , econometrics , mathematics , macroeconomics , philosophy , geometry , epistemology
This paper reconsiders the model presented by Flacco and Kroetch [1986]. It shows that with additive technological uncertainty the firm will produce and contract to sell the same output as under certainty. When the Flacco/Kroetch model is generalized to allow the firm to select contract commitments and planned output ex ante, no simple comparisons with certainty are possible. These results are broadly consistent with those obtained by Mills [1959; 1962] for demand uncertainty.