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Factor Price Stabilization and the Competitive Firm

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  • S. Devadoss
  • E. Kwan Choi

Abstract

This paper investigates the effects of factor price stabilization on production decisions of the competitive firm with ex post production flexibility. Factor price stabilization is achieved through changes in the guaranteed minimum price and the imposed maximum price. For the risk-averse firm, the effect of factor price stabilization, through a mean-preserving contraction, on capital crucially depends on whether capital and the variable input are substitutes or complements as well as the observable characteristics of the variable input demand curve.

Suggested Citation

  • S. Devadoss & E. Kwan Choi, 1991. "Factor Price Stabilization and the Competitive Firm," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 749-756.
    • Handle: RePEc:oup:ajagec:v:73:y:1991:i:3:p:749-756.
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    File URL: http://hdl.handle.net/10.2307/1242827
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    Cited by:

    1. Devadoss, Stephen, 1994. "Sluggish Price Adjustments And The Effectiveness Of Aggregate Demand Policies At The Sectoral Level," A.E. Research Series 305122, University of Idaho, Department of Agricultural Economics and Rural Sociology.
    2. Devadoss, Stephen, 1994. "Price Inertia: Money Supply And Price Changes," A.E. Research Series 305123, University of Idaho, Department of Agricultural Economics and Rural Sociology.
    3. L. Grega, 2002. "Price stabilization as a factor of competitiveness of agriculture," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 48(7), pages 281-284.

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