On Uncertainty When It Affects Successive Markets

In this paper, the authors examine how uncertainty can affect successive markets, when uncertainty can jointly influence both the upstream and downstream markets' conditions. The main result of the paper is that the equilibrium input and output quantities under stochastic dependence can be higher or lower than the corresponding quantities in the case of certainty equivalence depending on how much dependent are the events. In this paper, they examine how uncertainty can affect successive markets, when uncertainty can jointly influence both the upstream and downstream markets' conditions. Generally, shocks affecting the economic environment influence simultaneously most markets in the same chain of value, and not each of them separately.