Capital adjustment costs and firm risk aversion

We show that the equilibrium of a standard real business cycle model with capital adjustment costs can be supported as an equilibrium with a risk averse firm and no adjustment costs. Our result sheds light on the implications of a utility maximizing (UM) firm, which is one of the approaches proposed in the literature to get around the firm objective problem when markets are incomplete. (C) 2003 Elsevier B.V. All rights reserved.