Comparison of the production behavior of regret-averse and purely risk-averse firms
Abstract: Previous studies focused on the comparison of the optimal output levels of regret- averse firms under uncertainty and firms under certainty. This paper extends the theory by further investigating the effects of regret-aversion on production. We compare the optimal output levels of regret-a...
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| Autores principales: | , |
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| Lenguaje: | English |
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Universidad de Chile. Departamento de Economía
2019
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| Acceso en línea: | http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862019000200157 |
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| Sumario: | Abstract: Previous studies focused on the comparison of the optimal output levels of regret- averse firms under uncertainty and firms under certainty. This paper extends the theory by further investigating the effects of regret-aversion on production. We compare the optimal output levels of regret-averse firms with purely risk- averse firms under uncertainty and firms under certainty. We first show that the linear-regret firms will surely produce more than their purely risk-averse counterparts and surely produce less than firms under certainty. Thereafter, we give sufficient conditions to ensure the regret-averse firms to produce more than the purely risk-averse counterparts and study the comparative statics of the optimal production. We also develop properties of regret-aversion on production. |
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