An Induced Theory of the Firm Under Risk: The Pure Mutual Fund

Abstract

In two previous articles [11] and [12] a family of normative models of the individual's economic decision problem under risk was presented. At the same time, certain implications of these models with respect to individual behavior were deduced for a class of utility functions. This paper will show that these models also give rise to an induced theory of the formation and operation of firms under risk for the same class of utility functions.