"Fixed Costs" and the Competitive Firm Under Price Uncertainty: Comment/Reply

In a recent article in this Review, Agnar Sandmo makes the following statement One of the basic results in the theory of the firm under certainty is that fixed costs do not matter. This is not so under uncertainty. Decreasing absolute risk aversion is a necessary and sifflcient condition for the par...

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Bibliographic Details
Published in:The American economic review 1972-03, Vol.62 (1), p.193
Main Authors: Bernhardt, Irwin, Sandmo, Agnar
Format: Article
Language:English
Subjects:
Economic theory
Studies
Uncertainty
Online Access:Get full text
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Summary:In a recent article in this Review, Agnar Sandmo makes the following statement One of the basic results in the theory of the firm under certainty is that fixed costs do not matter. This is not so under uncertainty. Decreasing absolute risk aversion is a necessary and sifflcient condition for the partial derivative of output with respect to "fixed costs" to be negative. This statement is formally correct in terms of his model as Sandmo neatly proves.
ISSN:0002-8282
1944-7981