An extension of the multi-output state-contingent production model

This paper presents new developments on the state-contingent theory of production under uncertainty with stochastic prices. Our main purpose is to generalize the usual finite discrete state-contingent production model to infinite dimensional, possibly uncountable spaces which look like a more realistic framework. Usual duality results are established in this general context, shedding some light on the links between risk-neutral probabilities and shadow prices. A direct generalized production risk premium is defined and is shown to be independent of the inputs level when the technology is output translation homothetic. In such a case, the technology exhibits constant absolute riskiness. We thank Bob Chambers for his helpful comments.