Title

Input demand under joint energy and output prices uncertainties

Document Type

Journal article

Source Publication

Asia-Pacific Journal of Operational Research

Publication Date

1-1-2017

Volume

34

Issue

4

First Page

no. 4

Publisher

World Scientific Publishing Co. Pte Ltd

Keywords

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

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.

DOI

10.1142/S021759591750018X

Print ISSN

02175959

E-ISSN

17937019

Publisher Statement

Copyright © 2017 World Scientific Publishing Co. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Alghalith, M., Guo, X., Niu, C., & Wong, W.-K. (2017). Input demand under joint energy and output prices uncertainties. Asia-Pacific Journal of Operational Research, 34(4), no. 4. doi: 10.1142/S021759591750018X

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