Optimal Output for the Regret-Averse Competitive Firm Under Price Uncertainty
25 Pages Posted: 17 Feb 2012
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: Suggested Citation
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