Risk Neutral - Theory of The Firm

Theory of The Firm

In the context of the theory of the firm, a risk neutral firm facing risk about the market price of its product, and caring only about profit, would maximize the expected value of its profit (with respect to its choices of labor input usage, output produced, etc.). But a risk averse firm in the same environment would typically take a more cautious approach.

Read more about this topic:  Risk Neutral

Famous quotes containing the words theory of, theory and/or firm:

    Thus the theory of description matters most.
    It is the theory of the word for those
    For whom the word is the making of the world,
    The buzzing world and lisping firmament.
    Wallace Stevens (1879–1955)

    The weakness of the man who, when his theory works out into a flagrant contradiction of the facts, concludes “So much the worse for the facts: let them be altered,” instead of “So much the worse for my theory.”
    George Bernard Shaw (1856–1950)

    Our peace shall stand as firm as rocky mountains.
    William Shakespeare (1564–1616)