NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effect of Risk on the Firm's Optimal Capital Stock: A Note

Kevin J. Maloney, William J. Marshall, Jess B. Yawitz

NBER Working Paper No. 1132
Issued in May 1983
NBER Program(s):   ME

In this paper we extend the recent work on the choice of input mix under uncertainty. In particular, we demonstrate that the qualitative nature of the disturbance term, along with the decision sequence, is a crucial determinant of the overall effect of uncertainty on the optimal input mix of a firm. Using general demand and production functions in conjunction with a mean-variance framework for financial valuation, we demonstrate the differential effects of systematic and non-systematic risk on the firm's choice of an optimal input mix. Consistent with earlier work in economics, this analysis demonstrates that uncertainty, regardless of the source, has important implications for the firm's choice of technology.

download in pdf format
   (101 K)

email paper

This paper is available as PDF (101 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1132

Published: Maloney, Kevin J., William J. Marshall and Jess B. Yawitz. "The Effect of Risk on the Firm's Optimal Capital Stock: A Note." Journal of Finance, Vol. 38, No. 4, (September 1983).

Users who downloaded this paper also downloaded these:
Lanjouw w11321 Patents, Price Controls, and Access to New Drugs: How Policy Affects Global Market Entry
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us