| Abstract: | This reply responds to two comments on our 1986 article in this journal under the same title. The comments discuss a special case of the model which gives a certainty result, and also propose several alternative formulations of the model. The reply argues that the special certainty result is not an interesting or reasonable case, and discusses the relationship between the proposed alternative formulations and the original model. The influence of risk preferences on optimal output is analyzed through comparative statics for changes in risk in the context of the original model. |
