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The Dynamic Competitive Firm under Spot Price Uncertainty

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  • Hey, John D

Abstract

The main result of this paper is that the classic "marginal cost equals price " condition for the output of the perfectly competitive firm in a one-period certain world carries over to a many-period uncertain world if the firm is allowed to hold inventories and if there exists a forward market for the firm's product. This implies the separation of the firm's output decision from its sales decision, and the separation of the firm's output decisions in different periods. Furthermore, output is unaffected by the uncertainty and the firm's attitude to it, though the sales decisions do depend on these factors. Copyright 1987 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Hey, John D, 1987. "The Dynamic Competitive Firm under Spot Price Uncertainty," The Manchester School of Economic & Social Studies, University of Manchester, vol. 55(1), pages 1-12, March.
    • Handle: RePEc:bla:manch2:v:55:y:1987:i:1:p:1-12
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    Cited by:

    1. Sergio H. Lence & Dermot J. Hayes, 1995. "Optimal Hedging Under Forward‐Looking Behaviour," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 329-342, December.
    2. Sergio H. Lence & Dermot J. Hayes & Yong Sakong, 1994. "Multiperiod Production with Forward and Option Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(2), pages 286-295.
    3. Sergio H. Lence & Dermot J. Hayes, 1998. "The Forward-Looking Competitive Firm under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 303-312.
    4. Matthias Pelster, 2015. "Marketable and non-hedgeable risk in a duopoly framework with hedging," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 697-716, October.
    5. Lence, Sergio Horacio, 1991. "Dynamic firm behavior under uncertainty," ISU General Staff Papers 1991010108000010656, Iowa State University, Department of Economics.
    6. Wahl, Jack E. & Broll, Udo, 2009. "Güterwirtschaftliches Risikomanagement: Ein Entscheidungsmodell zur Lagerpolitik bei Unsicherheit," Dresden Discussion Paper Series in Economics 14/09, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    7. Nyassoke Titi Gaston Clément & Sadefo Kamdem Jules & Fono Louis Aimé, 2022. "Dynamic optimal hedge ratio design when price and production are stochastic with jump," Annals of Finance, Springer, vol. 18(3), pages 419-428, September.
    8. Nyassoke Titi Gaston Clément & Jules Sadefo-Kamdem & Louis Aimé Fono, 2019. "Dynamic Optimal Hedge Ratio Design when Price and Production are stochastic with Jump," Working Papers hal-02417401, HAL.

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