Hedging against risk and the substitution of consumer issued assets by producer issued assets: the role of state specialisation of production processes
by Pedro J. Gutierrez
Global Business and Economics Review (GBER), Vol. 3, No. 2, 2001

Abstract: This paper analyses the conditions under which consumer issued assets can be substituted by producer issued assets in the risk hedging process when the uncertainty source is technological. Using a general equilibrium framework, I demonstrate that the generation of state specialised production processes makes consumer issued assets redundant, providing risk cover through investment and eliminating the transaction costs implicit in the consumer issued assets. This mechanism, similar to that of Coase (1937), allows the profit from such state specialisation to be calculated, contributing to the development of the firm theory under uncertainty.

Online publication date: Mon, 07-Feb-2005

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