Title: Hedging against risk and the substitution of consumer issued assets by producer issued assets: the role of state specialisation of production processes

Authors: Pedro J. Gutierrez

Addresses: Universidad de Valladolid, Spain

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.

Keywords: risk hedging; uncertainty; consumer issued assets; producer issued assets; firm theory; state specialised production processes; insurance markets.

DOI: 10.1504/GBER.2001.006173

Global Business and Economics Review, 2001 Vol.3 No.2, pp.212 - 232

Published online: 07 Feb 2005 *

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