LeChatelier effects for the competitive firm under price uncertainty

The intuition that constrained choices are less elastic as well as suboptim al is confirmed by LeChatelier's principle in economic models of optimizing behavior for environments with no uncertainty. For a competitive entrepren eurial firm facing output price uncertainty, risk preferences interact with possibilities for substituting between capital and labor in production to determine the presence or absence of LeChatelier effects for labor demanded . LeChatelier's principle holds without qualification for output supplied i n the neighborhood of any long-run equilibrium with respect to both monoton e likelihood ratio improvements in the price distribution and increases in risk aversion. Global LeChatelier predictions, however, are unattainable.