Production under uncertainty: a simulation study

Shankar, Sriram and Quiggin, John (2013) Production under uncertainty: a simulation study. Journal of Productivity Analysis, 39 3: 207-215. doi:10.1007/s11123-012-0281-3

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Author Shankar, Sriram
Quiggin, John
Title Production under uncertainty: a simulation study
Journal name Journal of Productivity Analysis   Check publisher's open access policy
ISSN 0895-562X
1573-0441
Publication date 2013-06
Year available 2012
Sub-type Article (original research)
DOI 10.1007/s11123-012-0281-3
Open Access Status
Volume 39
Issue 3
Start page 207
End page 215
Total pages 9
Place of publication New York, NY United States
Publisher Springer New York LLC
Collection year 2014
Language eng
Formatted abstract
In this paper we model production technology in a state-contingent framework. Our model analyzes production under uncertainty without being explicit about the nature of producer risk preferences. In our model producers’ risk preferences are captured by the risk-neutral probabilities they assign to the different states of nature. Using a state-general state-contingent specification of technology we show that rational producers who encounter the same stochastic technology can make significantly different production choices. Further, we develop an econometric methodology to estimate the risk-neutral probabilities and the parameters of stochastic technology when there are two states of nature and only one of which is observed. Finally, we simulate data based on our state-general state-contingent specification of technology. Biased estimates of the technology parameters are obtained when we apply conventional ordinary least squares estimator on the simulated data.
Keyword Ces
Cobb Douglas
Output cubical
Risk neutral
State allocable
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
School of Economics Publications
 
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