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Price Uncertainty (price + uncertainty)
Selected AbstractsThe Effects of Foreign Price Uncertainty on Australian Production and Trade,THE ECONOMIC RECORD, Issue 273 2010ELIE APPELBAUM This article provides an empirical analysis of the impact of uncertain international prices on Australia's production sector and international trade. We model the movement of traded goods prices via a generalised autoregressive conditional heteroskedasticity model and embed this within an expected utility maximising model of the production sector. The empirical results are consistent with expected utility maximisation and the hypothesis of risk neutrality is soundly rejected. Estimates of the effects of changes in expected prices and volatility of traded goods prices upon production decisions and the return to capital are discussed. The conclusion is that price uncertainty matters for the Australian production sector. [source] Use of Compliance Rewards in Agri-environmental SchemesJOURNAL OF AGRICULTURAL ECONOMICS, Issue 3 2009Yuki Yano Q12; Q20; Q28; Q57 Abstract Ensuring that farmers comply with the terms of agri-environmental schemes is an important issue. This paper explores the use of a ,compliance,reward' approach under heterogeneous net compliance costs with respect to cost-share working lands programmes such as the Environmental Quality Incentives Program (EQIP) in the United States. Specifically, we examine the use of a reward under asymmetric information and output price uncertainty. We examine two possible sources of financing under the assumption of budget neutrality: (i) funds obtained by reducing monitoring effort; and (ii) money saved by reducing the number of farmers enrolled. We discuss the advantages and disadvantages of each source of funding and analyse these numerically for both risk-neutral and risk-averse farmers. We also examine the trade-off between increased expenditure on monitoring effort and compliance rewards when additional budgetary resources are available. We show that under certain conditions a compliance reward can increase compliance rates. For risk-averse farmers, however, conditions that ensure a positive outcome become more restrictive. [source] INVESTMENT RISK AND THE TRANSITION INTO HOMEOWNERSHIP,JOURNAL OF REGIONAL SCIENCE, Issue 2 2007Tracy M. Turner R0; D12; D84 ABSTRACT This paper investigates the extent to which house,price uncertainty affects the transition of renter households into homeownership. Using a 14-year household panel from the Panel Study of Income Dynamics during the years 1984,1997 and measures of the time-varying risk and return to owner-occupied housing, we estimate a Cox proportional hazard model of the effect of house,price volatility on the transition into homeownership. Results indicate that house,price uncertainty has a negative and dramatic impact on transitions into homeownership. In addition, we find that the low-wealth renters are particularly sensitive to house,price risk. [source] The Exclusion Theorem in the Weberian SpaceJOURNAL OF REGIONAL SCIENCE, Issue 1 2000Song-Ken Hsu In this paper we employ a unifying approach to examine the exclusion theorem in a Weberian space under various types of uncertainty: input price or output price uncertainty, transport rate uncertainty, and technology uncertainty. The novelty of our approach is the usage of second-order conditions and comparative static analysis in the derivation of conditions for thevalidity of the exclusion theorem. Our main results are new and some are generalizations of those obtained in prior studies. [source] Duality, income and substitution effects for the competitive firm under price uncertaintyMANAGERIAL AND DECISION ECONOMICS, Issue 4 2005Carmen F. Menezes This paper uses duality theory to decompose the total effect on the competitive firm's output of an increase in the riskiness of output price into income and substitution effects. Properties of preferences that control the sign of each effect are identified. The analysis extends to the general class of quasi-linear decision models in which the payoff is linear in the random variable. Copyright © 2005 John Wiley & Sons, Ltd. [source] Liquidity risk and the hedging role of optionsTHE JOURNAL OF FUTURES MARKETS, Issue 8 2006Kit Pong Wong This study examines the impact of liquidity risk on the behavior of the competitive firm under price uncertainty in a dynamic two-period setting. The firm has access to unbiased one-period futures and option contracts in each period for hedging purposes. A liquidity constraint is imposed on the firm such that the firm is forced to terminate its risk management program in the second period whenever the net loss due to its first-period hedge position exceeds a predetermined threshold level. The imposition of the liquidity constraint on the firm is shown to create perverse incentives to output. Furthermore, the liquidity constrained firm is shown to purchase optimally the unbiased option contracts in the first period if its utility function is quadratic or prudent. This study thus offers a rationale for the hedging role of options when liquidity risk prevails. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:789,808, 2006 [source] EXPLAINING THE EQUITY RISK PREMIUM,THE MANCHESTER SCHOOL, Issue 6 2006LAURIAN LUNGU We develop a simple overlapping generations model in which the young have a choice in investing in equities or index-linked bonds. Projections of share price uncertainty over a 30-year period show that the risk associated with such long-term investments predicts an equity premium that matches historical values. Moreover, we calibrate the model and show that it can predict up to the fourth moment of both the observed risk premium and the real rate of interest. [source] Demand Diversification Under Uncertainty and Market PowerASIAN ECONOMIC JOURNAL, Issue 4 2001John J. Y. Seo This paper justifies theoretically and empirically the diversification behaviour of an importing firm when it chooses the mixture of potentially differentiated products of its major input under price uncertainty. The paper investigates an equilibrium relationship among three key explanatory variables, which are the expected price, the systematic risk of price, and monopolistic market power of the suppliers in the market. The theoretical section shows that there exists a conflict between the risk,diversification effect and the agent's preference over certain products when the importer chooses the vector of optimal quantity shares. The latter effect may disturb or even dominate the former, which can be represented in an equilibrium relationship similar to the framework of the CAPM. As an empirical application, the Chinese wheat import market is examined and analysed to answer the questions raised by the basic statistics. JEL classification: F12; F14; L22 [source] Understanding the effect of an emissions trading scheme on electricity generator investment and retirement behaviour: the proposed Carbon Pollution Reduction SchemeAUSTRALIAN JOURNAL OF AGRICULTURAL & RESOURCE ECONOMICS, Issue 2 2010Neil Ross Lambie The objective of a greenhouse gas (GHG) emissions trading scheme (ETS) is to reduce emissions by transitioning the economy away from the production and consumption of goods and services that are GHG intensive. A GHG ETS has been a public policy issue in Australia for over a decade. The latest policy initiative on an ETS is the proposed Carbon Pollution Reduction Scheme (CPRS). A substantial share of Australia's total GHG reduction under the CPRS is expected to come from the electricity generation sector. This paper surveys the literature on investment behaviour under an ETS. It specifically focuses on the relationship between the design of an ETS and a generator's decisions to invest in low emissions plant and retire high emissions plant. The proposed CPRS provides the context for presenting key findings along with the implications for the electricity generation sector's transition to lower emissions plant. The literature shows that design features such as the method of allocating permits, the stringency of the emissions cap along with permit price uncertainty, provisions for banking, borrowing and internationally trading permits, and the credibility of emissions caps and policy uncertainty may all significantly impact on the investment and retirement behaviour of generators. [source] Measuring producer welfare under output price uncertainty and risk non-neutralityAUSTRALIAN JOURNAL OF AGRICULTURAL & RESOURCE ECONOMICS, Issue 1 2005David S. Bullock Procedures to measure the producer welfare effects of changes in an output price distribution under uncertainty are reviewed. Theory and numerical integration methods are combined to show how for any form of Marshallian risk-responsive supply, compensating variation of a change in higher moments of an output price distribution can be derived numerically. The numerical procedure enables measurement of producer welfare effects in the many circumstances in which risk and uncertainty are important elements. The practical ease and potential usefulness of the procedure is illustrated by measuring the producer welfare effects of USA rice policy. [source] Domestic and Foreign Sales When Prices in Both Markets are UncertainBULLETIN OF ECONOMIC RESEARCH, Issue 2 2003Ardeshir J. Dalal This paper obtains comparative static results for a firm that sells a single output domestically and abroad when prices in both markets are uncertain. Results are obtained for both constant absolute risk aversion and for Ross decreasing absolute risk aversion, using a diagrammatic analysis which exploits the properties of expected marginal utility contours. The results depend crucially on whether foreign and domestic sales are net substitutes or complements. The model is more complex and yields fewer unambiguous results , particularly in the case of substitutes , than when there is price uncertainty in only one market. [source] | ||||||||||