Theory of the firm facing uncertain demand revisited

Arthur HAU

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

4 Citations (Scopus)


Empirical evidence shows that the Principle of Increasing Uncertainty (PIU) introduced by Leland is easily violated. Necessary and sufficient conditions, without relying on the PIU assumption, under which risk-averse monopolistic producers reduce their output levels upon the introduction of the Leland-type demand uncertainty are derived.
Original languageEnglish
Pages (from-to)457-464
Number of pages8
JournalEconomic Theory
Issue number2
Publication statusPublished - Aug 2004

Bibliographical note

Financial support from the Academic Programme Research Grants (Business Programme) of Lingnan University Ref.# DB01A3 (Res201/Bus003) is gratefully acknowledged.


  • Leland-type demand uncertainty
  • Principle of increasing uncertainty
  • Quantity-setting monopolistic firm
  • Single-crossing property

Cite this