Production location choice and risk aversion

Abstract.

This paper attempts to provide a general comparative static analysis on a firm's choice of production location with respect to variations in the degree of risk aversion under demand price, input price, and technology uncertainties. Our analysis shows that whether and how the plant location varies with a change in the firm's degree of risk aversion depend upon the nature of the production technology and how the input and location choice affect risk. It also demonstrates that some of our results are new, while some are generalizations of those obtained by Martinich and Hurter (1982).