Adjustment to Production Uncertainty and the Theory of the Firm: A Comment.

This paper reconsiders the model presented by Flacco and Kroetch (1986). It shows that with additive technological uncertainty the firm will produce and contract to sell the same output as under certainty. When the Flacco/Kroetch model is generalized to allow the firm to select contract commitments and planned output ex ante, no simple comparisons with certainty are possible. These results are broadly consistent with those obtained by Mills (1959, 1962) for demand uncertainty. Copyright 1990 by Oxford University Press.