Input demand under joint energy and output prices uncertainties

Moawia ALGHALITH, Xu GUO, Cuizhen NIU, Wing Keung WONG

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

2 Citations (Scopus)

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
Pages (from-to)no. 4
JournalAsia-Pacific Journal of Operational Research
Volume34
Issue number4
DOIs
Publication statusPublished - 1 Jan 2017
Externally publishedYes

Fingerprint

Price uncertainty
Input demand
Energy
Energy prices
Risk-averse
Elasticity
Comparative static analysis
Mean-variance
Decreasing absolute risk aversion

Keywords

  • Price uncertainty
  • energy price
  • mean-variance
  • risk
  • utility

Cite this

ALGHALITH, Moawia ; GUO, Xu ; NIU, Cuizhen ; WONG, Wing Keung. / Input demand under joint energy and output prices uncertainties. In: Asia-Pacific Journal of Operational Research. 2017 ; Vol. 34, No. 4. pp. no. 4.
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Input demand under joint energy and output prices uncertainties. / ALGHALITH, Moawia; GUO, Xu; NIU, Cuizhen; WONG, Wing Keung.

In: Asia-Pacific Journal of Operational Research, Vol. 34, No. 4, 01.01.2017, p. no. 4.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AU - GUO, Xu

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AU - WONG, Wing Keung

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N2 - 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.

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