The firm under regret aversion

Arbeitspapier

We examine the economic behavior of the regret-averse firm under price uncertainty. We show that the global and marginal effects of price uncertainty on production are both positive (negative) when regret aversion prevails if the random output price is positively (negatively) skewed. In this case, high (low) output prices are much more likely to be seen than low (high) output prices. To minimize regret, the firm is induced to raise (lower) its output optimal level. The skewness of the price distribution as such plays a pivotal role in determining the regret-averse firm's production decision.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CEPIE Working Paper ; No. 03/17

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: Production ; Regret theory ; Skewness ; Uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Broll, Udo ; Welzel, Peter ; Wong, Kit Pong
• Event: Veröffentlichung
• (who): Technische Universität Dresden, Center of Public and International Economics (CEPIE)
• (where): Dresden
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/155304
• URN: urn:nbn:de:bsz:14-qucosa-219229
• Last update: 10.03.2025, 11:42 AM CET