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Estudios de economía

versión On-line ISSN 0718-5286

Estudios de Economía vol.46 no.2 Santiago dic. 2019

http://dx.doi.org/10.4067/S0718-52862019000200157 

Articles

Comparison of the production behavior of regret-averse and purely risk-averse firms

Comparación del comportamiento de producción de empresas aversas al arrepentimiento y aversas al riesgo

Xu Guo1 

Wing-Keung Wong2 

1School of Statistics, Beijing Normal University, China

2Department of Finance, Fintech Center and Big Data Research Center, Asia University, Taiwan (Province of China)

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.

Keywords: Production; regret aversion; risk aversion; uncertainty

Resumen:

Estudios previos se focalizaron en la comparación de los niveles óptimos de producción de empresas aversas al arrepentimiento bajo certidumbre e incerti- dumbre. Aquí se extiende la teoría al comparar los niveles óptimos de producción de empresas aversas al arrepentimiento con aquellas aversas al riesgo (con certidumbre e incertidumbre). Mostramos que empresas con arrepentimiento lineal producirán más que las empresas aversas al riesgo y menos que con certidumbre. Desarrollamos las propiedades de la aversión al arrepentimiento en la producción utilizando un modelo binario. Los resultados encontrados pueden ser de utilidad para las decisiones de producción.

Palabras clave: Producción; aversión al arrepentimiento; aversión al riesgo; incertidumbre

Full text available only in PDF format.

Texto completo disponible sólo en PDF.

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Received: June 0, 2018; Accepted: September 0, 2018

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