A risk-averse price-setting firm which knows the quantity demanded at the status quo price but has imperfect information otherwise may choose not to change it although an otherwise identical risk-neutral firm would do so, provided the variance of the firm's subjective probability distribution...

NONDEGENERATE INTERVALS OF NO-TRADE PRICES FOR RISK-AVERSE TRADERS ABSTRACT. According to the local risk-neutrality theorem an agent who has the opportunity to invest in an uncertain asset does not buy it or sell it short iff its expected value is equal to its price, independently of the...

A model is analyzed in which workers' efforts depend positively on the real wage and the unemployment rate. Due to isoelastic demand and constant marginal cost it is optimal for firms to set the output price as a fixed markup over the nominal wage. When demand shocks occur, firms' first response...