UNSPECIFIED. (1993) RELIABILITY, RISK-AVERSION AND THE POSITIVE THEORY OF PUBLIC-ENTERPRISE. ENERGY ECONOMICS, 15 (3). pp. 190-196. ISSN 0140-9883

Abstract

This paper extends the theory of reliability by developing it in the context of the positive theory of public enterprise. The public enterprise is assumed to be a size-maximiser and to choose price and capacity in the face of uncertain demand and subject to an expected profit target. It is shown that a risk averse public enterprise will set its levels of price, capacity and reliability either all above or all below those of a risk neutral public enterprise depending on the value of the elasticity of expected sales relative to unity. In addition, it is shown that price changes may be superior to capacity changes as a guide to changes in reliability.

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