Uncertainty, Risk Aversion, and Optimal Defense Against Interruptions in Supply
Martin C. McGuire ,
( 17 )
Defence and Peace Economics

Recent international conflicts have resurrected concerns about how to manage supply disruptions or sudden escalation of need for energy, and other critical imports such as vaccines or military components. Prominent proactive measures include support of domestic production and accumulation of reserves or maintenance of stand‐by production. This paper develops a clear transparent method for comparing instruments and for identifying the optimum policy mix. We show how a country’s risk aversion influences the best mix of policies and interacts unexpectedly with the degree of risk itself.

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