On the Theory of the Competitive Firm under Price Uncertainty: Note

Sandmo analyzed the effects of change in the expected value and uncertainty of the price on the optimal output of the competitive firm, which were written as ax/aO and ax/aO in his article, under the assumptions mentioned above. As a result of his analysis, he asserted that while the sign of ax/aO can be clearly judged to be positive, the sign of ax/ay is ambiguous in general. The purpose of this note is to show that investigating the sign of ax/ay under the same assumptions and analytic apparatus as Sandmo's, we can decide the sign of ax/a-y, manifestly in opposition to his assertions.