Factor price stabilization and the competitive firm

S. Devadoss, E. Kwan Choi

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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.

Original languageEnglish
Pages (from-to)749-756
Number of pages8
JournalAmerican Journal of Agricultural Economics
Volume73
Issue number3
DOIs
StatePublished - Aug 1991

Keywords

  • Factor price stabilization
  • Risk aversion

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