Optimal Output for the Regret-Averse Competitive Firm Under Price Uncertainty

25 Pages Posted: 17 Feb 2012

See all articles by Wing-Keung Wong

Wing-Keung Wong

Asia University, Department of Finance

Martín Egozcue

University of Montevideo - Department of Economics; Norte Construcciones

Date Written: February 16, 2012

Abstract

We study the optimal output of a competitive firm under price uncertainty. Instead of assuming a risk-averse firm, we assume that the firm is regret-averse. We find that optimal output under uncertainty would be lower than under certainty. We also prove that optimal output could increase or decrease when the regret factor varies.

Keywords: competitive firm, risk aversion, regret aversion, decision making

JEL Classification: D00, D03, D21

Suggested Citation

Wong, Wing-Keung and Egozcue, Martín, Optimal Output for the Regret-Averse Competitive Firm Under Price Uncertainty (February 16, 2012). Available at SSRN: https://ssrn.com/abstract=2006122 or http://dx.doi.org/10.2139/ssrn.2006122

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

Martín Egozcue

University of Montevideo - Department of Economics ( email )

Prudencio de Pena 2440
Montevideo, CP 11600
Uruguay

Norte Construcciones

Punta del Este, Maldonado 20100
Uruguay

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