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Theory of the firm facing uncertain demand revisited

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  • Arthur Hau

Abstract

Empirical evidence shows that the Principle of Increasing Uncertainty ( PIU) introduced by Leland is easily violated. Necessary and sufficient conditions, without relying on the PIU assumption, under which risk-averse monopolistic producers reduce their output levels upon the introduction of the Leland-type demand uncertainty are derived. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • Arthur Hau, 2004. "Theory of the firm facing uncertain demand revisited," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 457-464, August.
    • Handle: RePEc:spr:joecth:v:24:y:2004:i:2:p:457-464
    DOI: 10.1007/s00199-003-0417-9
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    Citations

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    Cited by:

    1. Michal Bauer, 2007. "An Endogenous Attitude to Firms’ Risk Aversion: A Model," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(7-8), pages 382-399, September.
    2. Jim Y. Jin & Shinji Kobayashi, 2016. "Impact of risk aversion and countervailing tax in oligopoly," Annals of Finance, Springer, vol. 12(3), pages 393-408, December.
    3. Geoffrey A. Chua & Yan Liu, 2019. "Sensitivity analysis on responsive pricing and production under imperfect demand updating," Naval Research Logistics (NRL), John Wiley & Sons, vol. 66(7), pages 529-546, October.
    4. Jim Jin & Shinji Kobayashi, 2023. "Monopoly profit lower than oligopoly due to risk aversion," Economics Bulletin, AccessEcon, vol. 43(2), pages 1010-1015.
    5. Andersen, Per & Vetter, Henrik, 2015. "Pricing as a risky choice: Uncertainty and survival in a monopoly market," Economics Discussion Papers 2015-53, Kiel Institute for the World Economy (IfW Kiel).

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