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A question of Uncertainity Suppose a risk neutral competitive rm has to make its output decision before it observes the uncertain output price, p. The

A question of Uncertainity

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Suppose a risk neutral competitive rm has to make its output decision before it observes the uncertain output price, p. The expected value and variance of p are given by: p and 02. Let its cost function be given by C = Y2. (i) Dene and calculate the expected value of perfect information about p. (ii) how much is the rm willing to pay for information about p

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