Public Investment in Energy Production under Price Uncertainty

  • Michael Kennedy


Recent sharp increases in the price of imported oil, and consequent uncertainty about its price in future, have provoked much discussion about the desirability of government investment in energy production. Can firms be expected to undertake investments in high-cost energy despite the chance that energy prices may plummet in the future? This paper examines the conditions, in a stylised model of an economy facing import-price uncertainty, under which standard optimality criteria would call for government investment in energy. We assume that there exists a social welfare function of the Paretian class which policy-makers wish to maximise.1


Stock Market Public Investment Real Income Marginal Rate Indifference Curve 
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Copyright information

© Michael Allingham and M. L. Burstein 1976

Authors and Affiliations

  • Michael Kennedy

There are no affiliations available

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