Reinterpreting most of the market price of risk as a price of model uncertainty eradicates a link between asset prices and measures of the welfare costs of aggregate fluctuations that was proposed by Hansen et al. (1999), Tallarini (2000), and Alvarez and Jermann (2004). Prices of model uncertainty contain information about the benefits of removing model uncertainty, not the consumption fluctua...

Uncertainty shocks cause economic activity to contract and more so, if monetary policy is constrained by an effective lower bound on interest rates. In this paper, we investigate whether countries with a currency peg or countries within currency unions are also particularly prone to suffer from the adverse effects of heightened uncertainty because they lack monetary independence. First, we esti...

This research considers a supply chain under the following conditions: (i) two heterogeneous suppliers are in competition, (ii) supply capacity is random and pricing is endogenous, (iii) consumer demand, with and without an intermediate retailer, is price dependent. Specifically, we examine how uncertainty in supply capacity affects optimal ordering and pricing decisions, supplier and retailer ...

In this paper we prove a new version of the Cowling-Price theorem for Fourier transforms on Rn . Using this we formulate and prove an uncertainty principle for operators. This leads to an analogue of the Cowling-Price theorem for nilpotent Lie groups. We also prove an exact analogue of the Cowling-Price theorem for the Heisenberg group. 2000 Mathematics subject classification: primary 43A30.

A finite number of heterogeneous firms facing demand-induced price fluctuations imperfectly compete for heterogeneous workers. Because firms must commit to wages and employment before the realization of product price, they exhibit a risk-averse behavior. It is then shown that unemployment may arise in equilibrium because of the combination of uncertainty on product price and mismatch between wo...

This paper analyzes how capital structure and product market competition affect the firms’ choice between outsourcing with long term contracts and outsourcing to the spot market. When outsourcing to the spot market firms are exposed to price uncertainty, whereas a long term contract allows them to set in advance the outsourcing price. We show that, to the extent that leverage and uncertainty ca...

Conventional wisdom among environmental economists is that the relative slopes of the marginal social benefit and marginal social cost functions determine whether a price-based or quantity-based environmental regulation leads to higher expected social welfare. We revisit the choice between price-based vs. quantity-based environmental regulation under Knightian uncertainty; that is, when uncerta...

Planning and design procedure of an open pit mining project just can be started after ultimate pit determination. In the carried out study in this paper it was shown that the most important factor in ultimate pit determination and in consequence in the whole planning and design procedure of an open pit mine is the metal price. Metal price fluctuations in recent years were exaggerated and impose...

In a standard asset price model with rational expectations and short-term shocks, long-term shocks affect the distribution of agents’ risk-aversions. Price uncertainty and learning about the distribution are simultaneously determined in an equilibrium. For some parameters, there may be multiple equilibria. In one of them demand is low, there is little revelation of information and uncertainty i...

In this work, we propose extending the production planning decisions of a chemical process network to include optimal contract selection under uncertainty with suppliers and product selling price optimization. We use three quantity-based contract models: discount after a certain purchased amount, bulk discount, and fixed duration contracts. We propose the use of general regression models to des...