nonparametric measures of scale and technical change for competitive firms under uncertainty measures of scale elasticity and rate of technical change can be obtained nonparametrically in the sandmo model of competitive firms with nonlinear risk preference responding to output price risk information on risk attitudes is not needed for measurement of scale elasticity because it is observable as the ratio of average to marginal cost as in certainty models the cross section of panel data sets can be used to develop a nonparametric marginal cost measure which permits identification of scale elasticity the technical change measure then follows from the scale measure and the time series portion of the panel data set

scale and productivity measurement under risk the literature on risk and uncertainty gives an important place to studies comparing behavioral and comparative static results obtained under certainty and uncertainty the standard neoclassical theory of the firm however has much more to offer than behavioral results for example the optimizing behavior of the profit seeking firm insures that the degree of the firm s returns to scale can be measured by the ratio of cost to revenue furthermore it is also possible to isolate measures of the rate of technical change for a profit maximizing firm which depend solely upon observed prices and quantities this note demonstrates some of the implications of uncertainty for measuring scale economies and the rate of technical change specifically using a model developed by agnar sandmo 1971 it is demonstrated that under conditions of risk and uncertainty there are generally no measures of the scale elasticity or the rate of technical change which can be derived from observations on prices and quantity without information on either the structure of production or the utility function which underlies sandmo s analy

avoiding an ecological regime shift is sound economic policy we extend the shallow lake model by adding the capital stock of an industry a government can mitigate the effects of pollution arising from industrial activities by imposing the requirement to abate emissions within this framework two scenarios are examined in the social optimal benchmark the social planner optimally allocates investment in the competitive equilibrium market forces determine the investment in capital but the government can still abate emissions we find that irreversible environmental regime shifts are avoided in the competitive equilibrium by means of a static level of abatement when it is socially optimal to do so

competition from specialized firms and the diversification performance linkage in this study we show that the effect of diversification on performance is not homogeneous across industries and explore analytically and empirically the implications of this finding for the diversification literature diversified firms perform better in industries with a small number of nondiversified competitors or equivalently when specialized firms have a small combined market share but worse as the presence of specialized firms increases in the industries in which they compete the results are robust to the use of methods that alleviate the self selection problem and call for a reassessment of the diversification performance relationship

assessing the accountability of the benefit corporation will this new gray sector organization enhance corporate social responsibility in recent years the benefit corporation has emerged as a new organizational form dedicated to legitimizing the pursuit of corporate social responsibility csr eschewing traditional governmental authority the benefit corporation derives its moral legitimacy from the values of its owners and the oversight of a third party evaluator this research identifies the benefit corporation as a new type of gray sector organization gso and applies extant theory on gsos to analyze its design in particular it shows how the theory of gso accountability can be used to assess the potential of benefit corporations for enhancing csr this research first examines the statutes that have established benefit corporations in five states in the us along with bills in other states to show how legislation defines their specific public benefits and holds them accountable for delivering these benefits it then compares the accountability of the benefit corporation with that of other corporate centric gsos e g gsos that closely resemble traditional corporations it concludes with significant design based concerns about the utility of the benefit corporation as an effective organization for implementing csr

externalities a market model failure we focus here on a set of conceptual problems related to the accepted theory of externalities we are primarily concerned with difficulties that arise when a theoretical system is extended beyond its logical domain this is the practice in externality theory when the market model assuming independent agents is used to analyze physical interdependency the different kinds of dependencies obscure the standard use of the paretian analysis as the issues of rights and efficiency are mixed up the creation of emissions and the creation of externalities are further not held apart producing flows in the efficiency evaluations due to the interdependencies involved actions of both emitter and victim must be taken into account while searching for efficient policies finally we analyze the interrelationships between what is termed the internal structure of the market model and the annexed sphere of externalities we conclude that the accepted policy prescriptions both assume and demand no interrelationships between these two spheres we find the assumption unrealistic and inconsistent as concerns the basic foundations of the market model there are two main traditions addressing externalities the coasean and the pigovian this paper shows that both are vulnerable to the above critique thus the presumption that externality theory is now settled and coherent is seen to be without theoretical support

policy relevant nonconvexities in the production of multiple forest benefits abstract this paper challenges common assumptions about convexity in forest rotation models which optimize timber plus nontimber benefits if a local optimum occurs earlier than the globally optimal age policy based on marginal incentives may achieve suboptimal results policy relevant nonconvexities are more likely if i nontimber benefits dominate for young stands while the optimal age depends primarily on timber benefits or ii nontimber benefits dominate for mature stands and also determine the optimal age nonconvexities may create either temporary or persistent difficulties policymakers may improve efficiency by exploiting the relationship between the timber only optimum and the global optimum

the ethical backlash of corporate branding past decades have witnessed the growing success of branding as a corporate activity as well as a rise in anti brand activism while appearing to be contradictory both trends have emerged from common sources the transition from industrial to post industrial society and the advent of globalization the examination of which might lead to a socially grounded understanding of why brand success in the future is likely to demand more than superior product performance placing increasing demand on corporations with regard to a broader envelop of socially responsible behavior directions for strategic and managerial options are suggested

a decomposition of profit loss under output price uncertainty in this paper firm profit loss is decomposed as the sum of two terms related to the output price uncertainty price expectation error and risk preference plus one extra term expressing technical inefficiency we then describe the implementation of our theoretical model in a robust data envelopment analysis dea framework which allows an effective and separate estimation of each term of the decomposition in addition we offer an operational tool to reveal producers risk preferences a 2009 database of french fattening pig farms is used as an illustration our results indicate that risk preference and technical inefficiency are the main sources of profit loss

producer surplus and risk this paper examines the welfare economics of producer behavior under risk aversion hicksian marshallian and money equivalent measures are explored it is found that under decreasing absolute risk aversion compensating variation is less than the ordinary marshallian surplus which is less than the money equivalent measure under constant absolute risk aversion all measures coincide finally bounds on compensating and equivalent variations using ordinary producer surplus in a manner analogous to willige approach in consumer theory under certainty are studied similar results hold mutatis mutandis for input demands

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

nonconvexity induced by external costs on production theoretical curio or policy dilemma this paper considers with a degree of scepticism the sweeping policy conclusions that can be found in the theoretical literature concerning nonconvexit ies in the social production set induced by external costs on firms this literature has provided proofs of the possibility that such nonconvexit ies exist but these proofs have readily been interpreted as a basis on which to judge the advisability of policies to control external costs 2 indeed a number of authors have felt able to proceed from specific theoretical examples of the existence of nonconvexity to the opinion that nonconvexity represents a general obstacle to policy one of the ma in themes will be to demonstrate that the theoretical possibility of the existence of a nonconvexity at a m icro level does not imply the existence of a m icro or a fortiori macro nonconvexity in the real world nor does it imply that any nonconvexity that does exist in reality is relevant to policy the intention is not to deny that nonconvexit ies may represent an obstacle to the efficient control of external costs in specific contexts but in order to establish the real world policy relevance of a nonconvexity it is necessary to verify its existence emp irically and to establish that it stands in a particular relationship to the no policy starting point

resource allocation in a general equilibrium model of production under uncertainty the case of variable supply of labor abstract this paper examines the effects of a marginal change in uncertainty on resource allocation and factor rewards by relaxing the assumption of factor inelasticity we demonstrate that integrating a variable labor supply into batra s two sector uncertainty model can mitigate or reverse many of the earlier results specifically a marginal increase in uncertainty may trigger the resource to move from the certainty sector to the uncertainty sector in the presence of a backward bending labor supply curve

long run industry equilibrium with uncertainty abstract in this paper we consider the effects of uncertainty on industry equilibrium when firms must commit themselves to production before prices are revealed we show that a an increase in demand uncertainty will i not affect the equilibrium number and size of firms if they are risk neutral ii reduce the equilibrium number of firms if they are risk averse but will have an ambiguous effect on their size b in equilibrium firms operate at capacity if they are risk neutral but at excess capacity if they are risk averse

designing a global standardized methodology for measuring social entrepreneurship activity the global entrepreneurship monitor social entrepreneurship study although there is a high level of practitioner policymaker and scholar interest in social entrepreneurship most research is based on case studies and success stories of successful social entrepreneurs in a single country we develop a methodology to measure population based social entrepreneurship activity sea prevalence rates and test it in 49 countries our results provide insights into institutional and individual drivers of sea using the global entrepreneurship monitor gem methodology of total entrepreneurial activity tea we find that countries with higher rates of traditional entrepreneurial activity also tend to have higher rates of social entrepreneurial activity we develop a broad definition of social entrepreneurship and then explore types based on social mission revenue model and innovativeness

lechatelier effects for the competitive firm under price uncertainty lechatelier effects confirm the intuition that constrained decisions are not only suboptimal but also restrained in the sense of being less elastic samuelson 1947 introduced this idea into economics and showed that it blends neatly with economic models of decision making under certainty being particularly well suited to the competitive firm as emphasized by silberberg 1971 linearity of the objective function combines with convexity in the constraint imposed by the production technology to yield envelope results at the first order and lechatelier effects at the second as powerful consequences of the maximization hypothesis the envelope results of primary interest in producer theory shephard s lemma for cost functions and hotelling s lemma for profit functions are equality relations reflecting the firstorder stationarity of an optimum lechatelier effects in contrast are inequality relations reflecting the restrained nature of short run responses compared with long run less constrained responses thus the quantities of labor demanded and output supplied are more elastic with respect to wage rate and output price changes in the long run than in the short run these lechatelier predictions pertain to a firm that has fully adjusted to an exogenous set of factor and output prices and thus apply only in the neighborhood of a long run equilibrium configuration for the firm however they apply equally well whether capital and labor are substitute or complementary factors of production milgrom and roberts 1996 have established a global lechatelier principle under the assumption that capital and labor are always substitutes or always complements in production a stipulation that is necessarily true for the infinitesimal changes contemplated in the local lechatelier predictions when the firm makes decisions while facing uncertainty about output price risk preferences influence behavior if the uncertainty cannot be fully diversified through futures contracts or the sale of ownership shares as in the case of closely held family businesses such as some of those

the theory of the firm in long run equilibrium in a recent series of articles economists have investigated the comparative statics of the neoclassical firm in a competitive environment with the specific proviso that output price adjusts in response to changes in factor prices the older theory of the firm such as is found for example in paul samuelson 1947 is deficient in this regard metaphors such as short run have been used to gloss over the inconsistency of holding output price constant in the face of changing costs through changing factor prices in this paper a simple yet thorough analysis of a firm in a competitive industry i e a firm facing zero entry and adjustment cost conditions is given new results pertaining to restrictions on the behavior of such firms are offered also the length and complexity of established results is substantially reduced

the economics of renewable energy support abstract this paper uses theoretical and numerical economic equilibrium models to examine optimal renewable energy re support policies for wind and solar resources in the presence of a carbon externality associated with the use of fossil fuels we emphasize three main issues for policy design the heterogeneity of intermittent natural resources budget neutral financing rules and incentives for carbon mitigation we find that differentiated subsidies for wind and solar while being optimal only yield negligible efficiency gains policies with smart financing of re subsidies which either relax budget neutrality or use polluter pays financing in the context of budget neutral schemes can however approximate socially optimal outcomes our analysis suggests that optimally designed re support policies do not necessarily have to be viewed as a costly second best option when carbon pricing is unavailable

production uncertainty and pollution there has been considerable interest in two sector models in which the production of one of the goods is subject to uncertainty the major papers in this area are by rothenberg and smith 13 batra 1 britto 3 diamond 5 mills 12 and harford and park 8 in the latest of these papers harford and park 8 41 build on a model in mills 12 to show that if constant relative risk aversion r which is mathematically analogous to the pratt arrow measure is less than exceeds or equal to unity the direction of efficient resource flow under uncertainty as compared to certainty is away from the risky sector toward the risky sector or unchanged respectively in their model as in mills 12 the preferences of consumers are represented by a community expected utility function in the present two sector model the risky sector is an industry that is adversely affected by air pollution which is a by product of production in the other industry although there is a deterministic relation between the output and emissions of the polluting stable sector the damage caused to the other sector as a result of any given level of emissions depends upon random variables such as mixing height and wind velocity and is therefore stochastic it is not intuitively obvious whether the results of harford and park 8 hold if the uncertainty in the risky sector is the consequence of production in the stable sector in fact there is substantial dissimilarity in the results if the measure of risk aversion r is less than unity the efficient direction of resource flow is generally though not always toward the risky polluted sector if r equals unity the results also differ with resources shifting under uncertainty in the direction of the risky polluted sector only if r exceeds unity are the results always the same in both models with resources flowing toward the risky sector this paper presents the marginal condition such that under uncertainty the optimal combination of outputs includes less of the stable polluting good and more of the risky pollution sensitive good than would be the case if pollution damage were anticipated with certainty if this marginal condition does not hold the risk averse community may prefer either more or less of the polluting good a narrowed interpretation of the marginal condition is then used to predict the special case in which the efficient flow of resources under uncertainty is toward the polluting sector

industry equilibrium uncertainty and futures markets abstract this paper studies competitive long run industry equilibrium with uncertainty and futures trading we also provide a long run analysis of futures trading instead of the conventional short run analysis it is shown without using a general equilibrium model that given uncertain demand and risk aversion a bias backwardation or contango arises in long run industry equilibrium given risk neutrality such a bias however disappears we find that the occurrence of the bias depends not only on the existence of a risk premium but also on the length of the period considered each risk averse firm operates at a less efficient scale and moreover an expected spot price never accords with marginal cost when the expected spot price is less than marginal cost the risk averse firm can secure profit by selling futures contracts more than the amount of its output in the presence of production supply uncertainty a risk neutral firm operates with excess capacity under additive risk while the firm operates with proper capacity under multiplicative risk the key lies in whether its average cost curve is shifted by production risk

steering the climate system using inertia to lower the cost of policy common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially we show that this hotelling tax on carbon emissions is actually inefficient the least cost policy path takes advantage of the climate system s inertia to delay reducing emissions and allow greater cumulative emissions the efficient carbon tax follows an inverse u shaped path and grows more slowly than the hotelling tax economic models that assume exponentially increasing carbon taxes are overestimating the cost of limiting warming overestimating the efficient near term carbon tax and overvaluing technologies that mature sooner

on sustainability and the economics of survival this paper investigates the implications of sustainability and survival strategies for economic analysis it reviews connections between the approaches used by economists and biological scientists in the study of survival the paper emphasizes the role of irreversibility and uncertainty in the investigation of sustainability issues implications of the results for the analysis of economic behavior are discussed

long run scale adjustments of a perfectly competitive firm and industry an alternative approach the purpose of this note is to use the cost function technique to derive the results of the recent article in this review by c e ferguson and thomas saving hereafter f s our interest lies not so much in the results as in the simplicity and power of the technique itself in contrast to the rather cumbersome conventional apparatus of comparative statics micro theory 1 we shall not therefore discuss in detail the f s interpretations of their results although the technique should give the reader a more intuitive grasp of what is going on following f s we assume that the production function f x is increasing in each input strictly concave and twice continuously differentiable on the positive orthant all equilibrium input vectors are assumed strictly positive we start from the duality between production and cost functions demonstrated by shephard uzawa and mcfadden under our assumptions the production function may be uniquely characterized by its minimum total cost function defined for all p 0 by2 c min ptixi f x q

competitive industry equilibrium under uncertainty and free entry this paper investigates the properties of industry equilibrium under price uncertainty given free entry and exit for any form of risk averse behavior it is shown that an increase in demand uncertainty as measured by a mean preserving spread increases mean output price and reduces output of firms in long run equilibrium

adjustment to production uncertainty and the theory of the firm this paper considers the behavior of the firm which faces uncertainty in its production process but can adjust its output once the uncertainty is resolved ex post adjustment unlike previous treatments involves a marginal cost penalty if more output is required and a lowering of price if too much is produced with ex post adjustment allowed in this fashion it is found that nonlinear risk preferences do not affect the sign of the firm s marginal risk premium at optimum ex ante output the firm will produce less output than under certainty whether it is risk averse risk neutral or prefers risk

pigou and coase a mathematical reconciliation abstract this paper provides a rigorous statement of the coase theorem and establishes a formal equivalence between abstract allocative mechanisms attributed to coase and pigou the model proceeds from output functions that reduce to production functions in special cases thereby capturing effects that are obscured by conventional production and cost functions the model also emphasizes fundamental differences in the characteristics of inputs particularly land that are implied in the construction of externality stories finally the model embodies a clear distinction between local e g nuisance and global e g pollution externalities the coase theorem as stated is valid only in the former case

production risk risk aversion and the determination of risk attitudes among spanish rice producers agricultural production is subject to risk and the attitudes of producers toward risk will influence input choices insofar as these affect production risk risk attitudes in turn may be affected by certain socioeconomic characteristics of producers using 2004 survey data from a cross section of 130 spanish rice farms we estimate risk aversion coefficients of farmers and investigate the influence of a series of socioeconomic variables on their risk attitudes our results show that farmers exhibit risk averse behavior and that risk attitudes are related to a series of socioeconomic characteristics in particular the belief that the farm will continue after the producer retires is found to increase the degree of risk aversion while age is found to have nonlinear effects on risk aversion off farm income especially from nonagricultural activities is found to reduce risk aversion neither the educational level of the producer nor the presence of dependents on the household is found to have an effect on risk preferences regarding the production technology we find that land labor and fitosanitary products are risk reducing inputs whereas capital seeds and fertilizer all increase risk

social business hybrids demand externalities competitive advantage and growth through diversification organization scholars have recently studied the internal challenges and opportunities faced by companies that combine business and social logics i e social business hybrids by adopting a demand side perspective this paper addresses the implications of hybridity for strategic choices with products and businesses by focusing on the role of social business hybrids customers in the conceptual framework social identity theory explains how hybridity generates both positive and negative demand side externalities thus hybridity can be a source of competitive advantage in the marketplace but also create hurdles to firms ability to scale up their business diversification represents a potential choice that simultaneously generates growth preserves hybridity and avoids negative demand side externalities this paper analyzes the optimal type timing and scope of such diversification

social identity and preferences social identities prescribe behaviors for people we identify the marginal behavioral effect of these norms on discount rates and risk aversion by measuring how laboratory subjects choices change when an aspect of social identity is made salient when we make ethnic identity salient to asian american subjects they make more patient choices when we make racial identity salient to black subjects non immigrant blacks but not immigrant blacks make more patient choices making gender identity salient has no effect on intertemporal or risk choices

the competitive firm with uncertainty in the rate of labor turnover the adoption of more sophisticated production techniques usually requires firms to increase their expenditures on worker training and to pay greater attention to the costs of labor turnover economists are beginning to explicitly incorporate both training expenditures and the rate of labor turnover into the theory of the firm at the same time they are extending the theory of the firm to cases in which the firm faces uncertainty in its environment for example uncertainty in the price of output the prices of inputs or the quantity of output that a given input mix will yield this paper seeks to extend both of these areas of research by first introducing uncertainty in the rate of labor turnover and then examining the consequences of this new form of uncertainty for optimal training expenditures the optimal wage and the optimal level of output at the firm the paper assumes that the firm can increase output by providing workers with more training and can discourage turnover by paying workers a higher wage the quantities of labor and capital that the firm employs are held constant throughout the analysis it is found that the introduction of uncertainty in the rate of labor turnover results in lower optimal expenditures for both training and wages the reduction in training also reduces the level of output per worker at the firm comparative static analysis of ceteris paribus changes in the mean and variance of the labor turnover rate are also performed an increase in the mean of the turnover rate with the variance held constant reduces the wage and the amount of training provided also an increase in the variance of the turnover rate with the mean held constant reduces the wage and the amount of training provided a number of authors have considered models of the competitive firm in which the firm must determine its output level in the presence of uncertainty sandmo 13 batra and ullah 2 hartman 7 ishii 9 ingene and yu 8 flacco 5 and many others consider the behavior of the competitive firm facing uncertainty in its output price blair 3 ratti and ullah 12 stewart 15 perrakis 11 macminn and holtman 10 and many others consider cases in which the firm faces uncertainty in its technology or factor prices in all of these models it is assumed that the firm must make its input and output decisions before the uncertainty is resolved without ex

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

resource allocation with factor price differentials under price uncertainty the authors adapt the price uncertainty model to examine the implications of four types of marginal changes in price uncertainty changes in commodity price level the variance of price a proportional change in both the mean and the standard deviation of price and an equiproportionate change in the moments the analysis focuses on the effect of price uncertainty on sectoral capital labor ratios factor employment output levels factor rewards and expected profits the stability issue and its meaning for the determinant of the basic system is also discussed 11 references

achieving demand side synergy from strategic diversification how combining mundane assets can leverage consumer utilities we explore the overlooked issue of how certain strategic level interindustry diversification options might increase consumer utility discussions of inter industry diversification typically focus on producer synergies obtainable from economies of scope or from skill transfer across business units discussions of intra industry product diversification generally the province of marketing typically focus on synergies obtainable from product bundling which lowers producer costs or provides convenience for consumers we take a different tack by linking interindustry diversification and consumer utility we first separately examine two possible consumer benefits of interindustry diversification 1 facilitating consumers accomplishment of two tasks simultaneously or 2 attracting diverse consumer groups to a common platform when intergroup externalities exist we then assess a simple empirical context that shows potential for simultaneous consumer utilities and two sided market utility together we analyze this context and concurrently develop a mathematical model showing how these demand side synergies can create unique business value we next introduce asymmetric preferences among consumer subgroups and we refine our arguments by comparing their conclusions with the empirical data we learn that combinations of otherwise mundane i e commonplace assets can create consumer value superior assets are not necessary moreover common ownership is necessary for the pricing flexibility required to deliver and capture maximum value through interindustry diversification especially when consumer groups preferences may change the negotiations and settling up required for cooperation through alliances will without common ownership increase costs and reduce responsiveness we discuss the sustainability of demand side advantages and the implications of these ideas for future research and practice

environmental cleanliness as a public good welfare and policy implications of nonconvex preferences abstract this paper explores the implications of a form of nonconvexity in individual preferences over the public good cleanliness the implications of this nonconvexity on equilibrium outcomes welfare analysis the process of development and optimal government policy are examined the nonconvexity can imply a role for government in providing a commitment to a clean environment even if the government has a cost disadvantage in cleaning compared with individuals by providing a credible commitment to a clean environment the government can induce private individuals to undertake optimal levels of cleaning on their own

trade spatial separation and the environment we develop a simple two sector dynamic model to show how pollution can provide a motive for trade by spatially separating incompatible industries we assume that the production of smokestack manufactures generates pollution which lowers the prod uctivity of an environmentally sensitive sector farming two identical unregulated countries will gain from trade if the share of world income spent on smokestack goods is high in contrast when the share of world income spent on the dirty good is low trade can usher in a negatively reinforcing process of environmental degradation and real income loss for the exporter of smokestack goods 1999 elsevier science b v all rights reserved

an examination on the cost efficiency of the banking industry under multiple output prices uncertainty this article formulates a behavioural model of profit maximization which explicitly incorporates both multiple output prices risk and safety first practice this theoretical model is specifically suitable for investigating financial institutions whose output prices frequently encounter a variety of risks such as loan defaults arrears the sample banks are empirically found to be highly risk averse furthermore risk preferences exert little effect on the technical efficiency estimates whereas the same estimates obtained by the standard fixed effect model under certainty tend to be overestimated evidence is found that a specialized bank offering a single product with a larger scale of production will be preferable in an uncertain atmosphere

coasean bargaining in the presence of pigouvian taxation coasean arguments against the pigouvian perspective are well established a central tenet in this criticism argues that a pigouvian tax may be a source of inefficiency if parties were to bargain in the presence of a pigouvian tax allocative inefficiencies would occur the so called buchanan stubblebine turvey theorem by analyzing a coasean environment where the appropriation of property rights is costly we show coasean bargaining in the presence of a pre existing pigouvian tax may be superior this has implications for policy where dual regulatory environments exist such as regulation at the state and federal level as well as environmental liability and litigation

aggregation of price risk over commodities an economic index number approach this article extends the economic theory of index numbers to the aggregation of price risk over commodities in production superlative indexes of aggregate price risk are related to tornqvist and fisher type output quantity indexes an application to major crops in manitoba illustrates the empirical importance of the analysis

on the theory of the competitive firm under uncertainty when initial wealth is random since sandmo s seminal paper on the theory of the competitive firm under output price uncertainty there has been considerable research on this topic 2 5 6 10 11 14 in all these studies it is assumed that in the absence of complete contingent markets output price risk is the only source of uncertainty for the firm however this may not be a realistic assumption in particular as argued by kihlstrom et al 7 it appears reasonable to consider the case where some of the initial wealth of the firm is held in risky assets in that case initial wealth is uncertain and should be modelled as a random variable the objective of this paper is to investigate the introduction of random initial wealth in sandmo s theory of the firm under price uncertainty in sandmo s model a number of important comparative static results e g the conditions under which the supply function is upward sloping 14 69 or under which increased price uncertainty reduces supply 5 depends critically on the sign of a particular expression stated in lemma 2 in ishii 5 while sandmo 14 69 shows this expression is non negative under arrow pratt decreasing absolute risk aversion it can be verified that his proof no longer holds when initial wealth is random therefore the comparative static analysis conducted by sandmo 14 batra and ullah 2 and ishii 5 is no longer valid and gives ambiguous results under initial wealth uncertainty the reason is that the arrow pratt measures of risk aversion 1 12 are too weak for making comparisons in situations where there is more than one source of uncertainty 13 then what can be deduced from the theory of the competitive firm in the realistic case where both initial wealth and output price are uncertain we will show here that meaningful results on the behavior of the competitiv firm under uncertainty can be obtained provided that the arrow pratt measures of risk aversion 1 12 are replaced by the ross measures of risk aversion 13 in particular a comparative static analysis of the production decisions using ross characterization of risk behavior is presented a number of new results are derived on the properties of risk responsive supply and input demand functions under both price and initial wealth uncertainty

the lechatelier principle under production uncertainty under production uncertainty it is shown that the lechatelier principle holds for the derived demand of the ith factor if it is technically complementary competing with the riskincreasing risk reducing quasi fixed input and absolute risk aversion is decreasing in addition the lechatelier principle for the output supply function holds if the quasi fixed factor is an inferior normal and risk increasing risk reducing input and partial risk aversion is increasing

controlling the monopolistic polluter nihilism or eclecticism abstract this paper is concerned with the consequences of pollution control when the polluter is a monopolist who can choose between abating pollution by reducing output and by adopting a less polluting technology it is suggested that the risk of welfare losses resulting from control policy is lower when technology is flexible than when it is rigid nevertheless some risk does remain so the paper concludes with a discussion of the possible use of selective control instruments to keep the risk to a minimum

efficient pollution regulation getting the prices right this paper argues for efficient environmental regulations that equate the mar ginal damage of pollution to marginal abatement costs across space the paper estimates the source specific marginal damages of air pollution and calculates the welfare gain from making the current sulfur dioxide allowance trading pro gram for power plants more efficient the savings from using trading ratios based on marginal damages are between 310 and 940 million per year the potential savings from setting aggregate emissions efficiently and from includ ing more sources of air pollution are many times higher jel h23 q53 q58

oppositional logics and the antecedents of hybridization a country level study of the diffusion of islamic banking windows 1975 2017 little is known about when and where hybrid organizations diffuse we argue that neo institutional perspectives which stress the constraining role of market categories and institutional logics ha

building sustainable hybrid organizations the case of commercial microfinance organizations we explore how new types of hybrid organizations organizations that combine institutional logics in unprecedented ways can develop and maintain their hybrid nature in the absence of a ready to w

constant returns to scale and competitive equilibrium under uncertainty abstract this paper considers the implications of the assumption of constant returns to scale in expected utility maximizing models of the competitive firm or industry in which markets for risk are absent under widely used assumptions about risk preferences it is shown that with constant returns to scale average profits are more than necessary to cover the implicit costs of risk bearing when the free entry of identical firms is possible this assumption about technology is shown to be incompatible with the assumption that entrepreneurs are risk averse

towards an economic theory of the multiproduct firm this paper outlines a theory of the multiproduct firm important building blocks include excess capacity and its creation market imperfections and the peculiarities of organizational knowledge including its fungible and taut character a framework is adopted in which profit seeking firms are seen to diversify in order to avoid the high transactions costs associated with using various markets to trade the services of various specialized assets neoclassical explanations of the multiproduct firm are shown to be seriously deficient

competitive production and increases in risk the theory of the firm is a monumental achievement of neoclassical economics without this engine of analysis it would be difficult if not impossible to comprehend the pricing output and input decisions of firms as they respond to routine events like the imposition of a tax the opening of a new market a technical innovation and a sudden shortage of a key factor of production it is remarkable that this theory has been successful in explaining behavior that to a large extent is motivated by both profit and risk when the theory itself has only explicitly considered the profit motive this is not the place to dwell on the evolution of economic theory it suffices to note that there are many important economic phenomena that the purely deterministic theory does not explain the purpose of this note is to elucidate the way in which risk influences the output decisions of riskaverse entrepreneurs and the number of riskneutral firms in a competitive industry in both cases the predicted behavior differs from that of the deterministic theory in our study we shall restrict attention to the behavior of firms in a single period 2 setting the firm has no control over price and because storage makes no sense simply sells all of its output at the going price the source of uncertainty is the requirement that the firm produce before price is known where the price is a random variable with a known probability distribution the firm chooses output to maximize its expected utility it is well known that in the presence of uncertainty the optimal output of the risk averse firm is less than that of the riskneutral firm moreover increases in risk aversion in the sense of arrow and john pratt lead to further diminutions in output on the other hand for a fixed degree of risk aversion the change in output induced by a mean preserving increase in risk depends on the shape of the cost curve as well as the sign of the third derivative of the utility function u and the sign of the second derivative of qu q next competitive industry behavior under uncertainty is analyzed in order to isolate the effect of uncertainty firms are assumed to be risk neutral we show that both the optimal number of firms in the industry and excess capacity increase as industry output becomes riskier results like this are important for probabilistic economics for it would be unfortunate if the vitality of the stochastic theory of the firm relied solely on the controversial assumption of risk aversion 3

the scope and organization of production firm dynamics over the learning curve i introduce a bayesian learning model of the firm to account for a variety of empirical facts about firms the many tasks the firm can undertake the scope of the firm are informationally related so that the firm can enjoy some economies of scope from information the model predicts changes in firm size and its comovement with firm scope that are broadly consistent with the empirical evidence it also provides an explanation for the limits to the scope of the firm the firm may lack information or it may be costly to communicate the information necessary to undertake many tasks