Previous studies focus 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...

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...

Previous studies focus 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...

This paper uses four different disappointment models to examine the production decision of the competitive firm under uncertainty when the firm is not only risk-averse, but also disappointment-averse. We show the conditions under which the disappointment-averse firm will produce less than its...

Within the context of expected utility and in a discrete loss setting, we provide a complete account of the demand for insurance by strictly-risk averse agents and risk-neutral firms when they enjoy limited liability. When exposed to a bankrupting, binary loss and under actuarially fair prices,...

In this paper, we investigate the production and hedging decisions when the competitive firm is not only risk averse but also regret averse. Regret aversion is characterized by a utility function that includes dis-utility from having chosen ex-post suboptimal alternatives. We first show that...

One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper, we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher efficiency are also riskier. Using a...

This paper aims at assessing the optimal behavior of a firm facing stochastic costs of production. In an imperfectly competitive setting, we evaluate to what extent a firm may decide to locate part of its production in other markets different from which it is actually settled. This decision is...

In this paper, we study the incentives of low-quality sellers to separate them from high-quality sellers. We consider a framework with asymmetric quality information where the only way to communicate quality is via cheap-talk messages. In this framework, any separating strategy pursued by...

This paper examines the optimal production and export decisions of an international firm facing exchange rate uncertainty when the firm's preferences exhibit smooth ambiguity aversion. Ambiguity is modeled by a second-order probability distribution that captures the firm's uncertainty about...