Cost Functions Under Production Uncertainty

1 May 1994

journal article
Published by Wiley in American Journal of Agricultural Economics

Vol. 76 (2) , 196-204
https://doi.org/10.2307/1243621

Abstract

We characterize the cost functions which would be consistent with expected utility maximization when production is uncertain. It is not generally possible, assuming risk aversion, to use only expected output as the constraint in a cost minimization problem. In some leading cases, cost functions consistent with expected utility maximization are particularly useful because they are devoid of risk preferences.

Keywords

COST FUNCTIONS
RISK AVERSION
RISK PREFERENCES
MINIMIZATION PROBLEM
COST MINIMIZATION
LEADING CASES
PRODUCTION UNCERTAINTY
ASSUMING RISK
EXPECTED OUTPUT

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