| Abstract: | In previous studies it was shown that the prevailance of a forward market in which a competitive firm can sell and buy unrestricted quantities of its output or of an input in employs in production eliminates the effects of the corresponding price uncertainties on production decisions. In this study we examine the effects on production decisions of narrowing the range of transactions a firm can perform. It turns out that restricting the firm only to hedge either in the output forward market or the input forward market makes the production decisions again sensitive to expected future prices and the attitude of the firm towards risk. |
