The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function …, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in … mathematical challenges: simple extensions and generalizations of NM theory into the prospect theory cannot be frequently achieved …

Within the prospect theory the paper examines production and hedging decisions of a competitive firm under price … uncertainty. We consider the prospect theory for the firm's utility function in the two moment model known as (mu …,sigma)-preference. In contrast to the literature our findings show that the production under uncertainty can be larger than in the certainty …