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Cost Functions Under Production Uncertainty
Author(s) -
Pope Rulon D.,
Chavas JeanPaul
Publication year - 1994
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 - 10.2307/1243621
Subject(s) - maximization , utility maximization , minification , production (economics) , constraint (computer aided design) , risk aversion (psychology) , economics , expected utility hypothesis , mathematical optimization , production cost , utility maximization problem , econometrics , microeconomics , mathematical economics , mathematics , engineering , mechanical engineering , geometry
We characterize the cost functions which would be consistent with expected utility maximization when production is uncertain. It is not generally possible, assuming risk aversion, to use only expected output as the constraint in a cost minimization problem. In some leading cases, cost functions consistent with expected utility maximization are particularly useful because they are devoid of risk preferences.