The Behavior of Competitive Exporting Firms under Multiple Uncertainty

Abstract

The authors examine the behavior of a competitive risk-averse exporting firm subject to exchange rate and commodity price uncertainty, and to background uncertainty arising from cost and production. The aim of their study is fourfold--namely to look at: (1) the robustness of the results in traditional theory regarding the introduction of price uncertainty; (2) the role of forward-futures markets in the presence of background uncertainty; (3) the implications of this framework to the separation and the double-hedging theorems; and (4) the behavior of this firm when missing markets are gradually introduced. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.