Domestic and Foreign Sales When Prices in Both Markets are Uncertain
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. Copyright Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research 2003.
Year of publication: |
2003
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Authors: | Dalal, Ardeshir J. ; Raju, Sudhakar S. |
Published in: |
Bulletin of Economic Research. - Wiley Blackwell. - Vol. 55.2003, 2, p. 125-148
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Publisher: |
Wiley Blackwell |
Saved in:
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