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Behavioral Modes for a Firm Facing an Uncertain Supply or Demand Curve

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  • Lofgren, Karl Gustaf
  • Ranneby, Bo

Abstract

This paper contains a theoretical analys is of the behavior of a firmfacing a stochastic supply and demand curve. Certai n behavioral modes can be ranked under weaker conditions than in corresponding s tudies on stochastic demand. For other comparisons, the authors derive sufficien t conditions for one mode to dominate another. Earlier results indicate that a f irm which faces demand uncertainty prefers price variability to quantity variabi lity. It is shown by a counter example that the "price variability preference," which is troublesome for proponents of temporary fixed-price equilibrium models, is a consequence of restrictive stochastic specification. Copyright 1987 by The editors of the Scandinavian Journal of Economics.

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  • Lofgren, Karl Gustaf & Ranneby, Bo, 1987. "Behavioral Modes for a Firm Facing an Uncertain Supply or Demand Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(1), pages 39-54.
    • Handle: RePEc:bla:scandj:v:89:y:1987:i:1:p:39-54
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    Cited by:

    1. Schwab, Olaf & Bull, Gary & Maness, Thomas, 2005. "A mill-specific roundwood demand equation for southern and central Finland," Journal of Forest Economics, Elsevier, vol. 11(2), pages 95-106, September.

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