Input Demand under Joint Energy and Output Prices Uncertainties

Moawia Alghalith, Xu Guo, Cuizhen Niu, Wing Keung Wong

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

In this paper, we analyze the impacts of joint energy and output prices uncertainties on the input demands in a mean-variance framework. We find that an increase in expected output price will surely cause the risk-averse firm to increase the input demand, while an increase in expected energy price will surely cause the risk-averse firm to decrease the demand for energy, but increase the demand for the non-risky inputs. Furthermore, we investigate the two cases with only uncertain energy price and only uncertain output price. In the case with only uncertain energy price, we find that the uncertain energy price has no impact on the demands for the non-risky inputs. We also show that the concepts of elasticity and decreasing absolute risk aversion (DARA) play an important role in the comparative statics analysis.

Original languageEnglish (US)
Article number1750018
JournalAsia-Pacific Journal of Operational Research
Volume34
Issue number4
DOIs
StatePublished - Aug 1 2017

All Science Journal Classification (ASJC) codes

  • Management Science and Operations Research

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