Abstract

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 regret aversion has no effect on the optimal production level. While the presence of regret aversion will always reduce the optimal hedging position. Besides, with more regret aversion, the optimal hedging position will become smaller.

Full Text
Paper version not known

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.