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.
Bibliographical noteFinancial 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