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Article: Forward markets and the behaviour of the competitive firm with production flexibility
Title | Forward markets and the behaviour of the competitive firm with production flexibility |
---|---|
Authors | |
Keywords | Forward markets Production flexibility |
Issue Date | 2003 |
Publisher | Blackwell Publishing Ltd. The Journal's web site is located at http://www.blackwellpublishing.com/journals/BOER |
Citation | Bulletin Of Economic Research, 2003, v. 55 n. 3, p. 303-310 How to Cite? |
Abstract | This paper examines the production and hedging decisions of the competitive firm under output price uncertainty when a forward market for its output is available. The firm possesses production flexibility in that it makes its production decision after the resolution of the output price uncertainty, albeit subject to a capacity constraint on production. We show that the firm optimally acquires a higher level of capacity investment than an otherwise identical firm with no production flexibility. We further show that production flexibility allows the firm to implicitly hedge against its output price risk exposure by the ex post production decision. The firm as such underhedges its output price risk exposure in the forward market wherein the forward price contains a non-positive risk premium. |
Persistent Identifier | http://hdl.handle.net/10722/85583 |
ISSN | 2023 Impact Factor: 0.8 2023 SCImago Journal Rankings: 0.299 |
SSRN | |
References |
DC Field | Value | Language |
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dc.contributor.author | Wong, KP | en_HK |
dc.date.accessioned | 2010-09-06T09:06:50Z | - |
dc.date.available | 2010-09-06T09:06:50Z | - |
dc.date.issued | 2003 | en_HK |
dc.identifier.citation | Bulletin Of Economic Research, 2003, v. 55 n. 3, p. 303-310 | en_HK |
dc.identifier.issn | 0307-3378 | en_HK |
dc.identifier.uri | http://hdl.handle.net/10722/85583 | - |
dc.description.abstract | This paper examines the production and hedging decisions of the competitive firm under output price uncertainty when a forward market for its output is available. The firm possesses production flexibility in that it makes its production decision after the resolution of the output price uncertainty, albeit subject to a capacity constraint on production. We show that the firm optimally acquires a higher level of capacity investment than an otherwise identical firm with no production flexibility. We further show that production flexibility allows the firm to implicitly hedge against its output price risk exposure by the ex post production decision. The firm as such underhedges its output price risk exposure in the forward market wherein the forward price contains a non-positive risk premium. | en_HK |
dc.language | eng | en_HK |
dc.publisher | Blackwell Publishing Ltd. The Journal's web site is located at http://www.blackwellpublishing.com/journals/BOER | en_HK |
dc.relation.ispartof | Bulletin of Economic Research | en_HK |
dc.rights | Bulletin of Economic Research. Copyright © Blackwell Publishing Ltd. | en_HK |
dc.subject | Forward markets | en_HK |
dc.subject | Production flexibility | en_HK |
dc.title | Forward markets and the behaviour of the competitive firm with production flexibility | en_HK |
dc.type | Article | en_HK |
dc.identifier.openurl | http://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0307-3378&volume=55&spage=303&epage=310&date=2004&atitle=Forward+Markets+and+the+Behavior+of+the+Competitive+Firm+with+Production+Flexibility | en_HK |
dc.identifier.email | Wong, KP: kpwongc@hkucc.hku.hk | en_HK |
dc.identifier.authority | Wong, KP=rp01112 | en_HK |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1111/1467-8586.00177 | - |
dc.identifier.scopus | eid_2-s2.0-0042312546 | en_HK |
dc.identifier.hkuros | 92191 | en_HK |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-0042312546&selection=ref&src=s&origin=recordpage | en_HK |
dc.identifier.volume | 55 | en_HK |
dc.identifier.issue | 3 | en_HK |
dc.identifier.spage | 303 | en_HK |
dc.identifier.epage | 310 | en_HK |
dc.publisher.place | United Kingdom | en_HK |
dc.identifier.ssrn | 418825 | - |
dc.identifier.scopusauthorid | Wong, KP=7404759417 | en_HK |
dc.identifier.issnl | 0307-3378 | - |