Overlooked Results on the Competitive Firm under Output Price Risk: Alternative Sufficient Conditions for Downward Sloping Factor Demand Curves

The existing literature on the competitive firm under output price risk has concluded that the demand for labor (and any other factor) will be a decreasing function of the price of that factor if the firm’s utility function for profit satisfies decreasing absolute risk aversion. Here I add two alternative sufficient conditions, both related to the size of relative risk aversion.