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Volume 49 - March 1983

Contents

Page 2 of 2

Front Matter

Back Matter

Research Article

  • Choice of Technique Under Uncertainty*

  • David de Meza
  • Published online by Cambridge University Press:
    17 August 2016, pp. 95-99

  • Recent research on the behaviour of the firm under uncertainty is so formulated that the issue of choice of technique is excluded from serious consideration. The reasons are clear. With random demand or factor prices and no input variable ex-post it follows trivially that if the firm is risk neutral its choice of technique must be the same as under mean preserving certainty. On the other hand, if, as is usual, some but not all inputs are variable ex-post the standard assumption of a putty-putty technology implies that input levels are chosen sequentially and only when the uncertainty is resolved are factor proportions determined. The question of choice of technique under uncertainty is consequently assumed away; the analysis determines only the effect of uncertainty on the quantity of the fixed factor installed. A recent analysis in this vein by Perrakis (1980) concludes that if output is not fixed ex-ante, uncertainty over the price of variable inputs will normally raise the capital stock if the firm is risk neutral although risk aversion will offset this tendency; Nickell (1977 or 1978 ch. 5) obtains essentially similar results.

Recensions

Back Matter

Recension analytiques

Recensions

Correction

Recension analytiques

Front Matter

Other

Back Matter

Front Matter

Page 2 of 2