Abstract
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 language | English |
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Pages (from-to) | 457-464 |
Number of pages | 8 |
Journal | Economic Theory |
Volume | 24 |
Issue number | 2 |
DOIs | |
Publication status | Published - Aug 2004 |
Funding
Financial support from the Academic Programme Research Grants (Business Programme) of Lingnan University Ref.# DB01A3 (Res201/Bus003) is gratefully acknowledged.
Keywords
- Leland-type demand uncertainty
- Principle of increasing uncertainty
- Quantity-setting monopolistic firm
- Single-crossing property