Uninsurable risks: Uncertainty in production, the value of information and price dispersion

This article digresses over the interaction of uncertainty with the firm's optimal decisions in a simple framework: a standard price-taking (short-run restricted) single-input and output unit, subject to the interaction with a zero-mean Bernoulli lottery of variable dispersion. The firm is always considered an expected profit-maximizing entity. We inspect the consequences of exogenous uncertainty on the optimal allocations and oil its "mean- (and) variance" valuation position. Oil the one hand, we contrast the effect of different sources of uncertainty on the producer's problem - input and output prices and quantities. On the other, we analyse the impact of ex-post flexibility of the decision variables. Importance and role of measures of risk-aversion (of concavity and convexity) imbedded in the firms technology - either the production, marginal productivity or the cost function, - and potentially risk-enhancing or deterrent features of the latter in the transmission of exogenous uncertainty to the optimal profits' mean and volatility under the different scenarios are highlighted.