SEPARABILITY OF STOCHASTIC PRODUCTION DECISIONS FROM PRODUCER RISK PREFERENCES IN THE PRESENCE OF FINANCIAL MARKETS

This paper presents a unified treatment of the production and financial decisions available to a firm facing frictionless financial markets and a stochastic production technology under minimal assumptions on the firm's stochastic technology and objective function. The specific focus is on separation results for stochastic technologies, that is, on conditions under which the optimal production decision may be determined without regard to the risk preferences of the firm's owners. Necessary and sufficient conditions for separation, which generalize existing results, are presented.


Issue Date:
2002
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/28561
Total Pages:
22
Series Statement:
Working Paper WP 02-19




 Record created 2017-04-01, last modified 2017-08-24

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