Optimal output for the regret-averse competitive firm under price uncertainty

Martín Egozcue; Xu Guo; Wing Keung Wong

doi:10.1007/s40822-015-0030-9

Optimal output for the regret-averse competitive firm under price uncertainty

Martín Egozcue
, Xu Guo
, Wing Keung Wong^*

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › peer-review

16 Citations (Scopus)

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.

Original language	English
Pages (from-to)	279-295
Number of pages	17
Journal	Eurasian Economic Review
Volume	5
Issue number	2
DOIs	https://doi.org/10.1007/s40822-015-0030-9
Publication status	Published - Dec 2015

User-Defined Keywords

Competitive firm
Decision making
Optimal output
Regret aversion
Risk aversion

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10.1007/s40822-015-0030-9

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title = "Optimal output for the regret-averse competitive firm under price uncertainty",

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, Decision making, Optimal output, Regret aversion, Risk aversion",

author = "Mart{\'i}n Egozcue and Xu Guo and Wong, \{Wing Keung\}",

note = "Funding Information: The authors would like to thanks participants on 12th SAET Conference for their helpful comments to improve our paper. The third author would like to thank Professors Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. This research is partially supported by grants from the Fundamental Research Funds for the Central Universities NO. NR2015001, Hong Kong Baptist University (FRG2/14-15/040, FRG2/14-15/106), and Research Grants Council of Hong Kong (12502814). Publisher copyright: Copyright {\textcopyright} 2015, Eurasia Business and Economics Society",

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AU - Egozcue, Martín

AU - Guo, Xu

AU - Wong, Wing Keung

N1 - Funding Information: The authors would like to thanks participants on 12th SAET Conference for their helpful comments to improve our paper. The third author would like to thank Professors Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. This research is partially supported by grants from the Fundamental Research Funds for the Central Universities NO. NR2015001, Hong Kong Baptist University (FRG2/14-15/040, FRG2/14-15/106), and Research Grants Council of Hong Kong (12502814). Publisher copyright: Copyright © 2015, Eurasia Business and Economics Society

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N2 - 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.

AB - 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.

KW - Competitive firm

KW - Decision making

KW - Optimal output

KW - Regret aversion

KW - Risk aversion

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SP - 279

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JO - Eurasian Economic Review

JF - Eurasian Economic Review

IS - 2

ER -

Optimal output for the regret-averse competitive firm under price uncertainty

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