TY - JOUR
T1 - Regret theory and the competitive firm
T2 - A comment
AU - Niu, Cuizhen
AU - Guo, Xu
AU - Wang, Tao
AU - Xu, Peirong
N1 - Funding Information:
The authors are grateful to the Editor, Professor Stephen G. Hall, and anonymous referee for constructive comments and suggestions that led significant improvement of an early manuscript. We would also like to thank Professor Udo Broll for his valuable comments and suggestions. The second author would like to thank Professors Li-xing Zhu and Wing-Keung Wong for their continuous guidance and encouragement. The research was supported by Fundamental Research Funds for the Central Universities, the Research Funds of Renmin University of China (No. 14XNH102 ).
Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 2014/8
Y1 - 2014/8
N2 - In a recent paper, Wong [Wong, K. P. (2014), Regret theory and the competitive firm. Economic Modelling, 36, 172-175.] develops a model to examine the production behavior of a regret averse competitive firm. Wong discusses the sufficient condition to ensure the conventional result that the optimal output level under uncertainty is less than that under certainty hold. Our contributions in this note are two-fold. Firstly, we point out that Wong's condition in terms of the first order derivatives of the utility function and the regret function is actually not sufficient. Secondly and more importantly, we show that a sufficient condition should be in terms of the relatively increase rate of the first order derivatives of the two functions. That's, it's the ratio of the risk aversion and regret aversion degree that matters. Our proposed condition requests that the firm should be not too regret averse.
AB - In a recent paper, Wong [Wong, K. P. (2014), Regret theory and the competitive firm. Economic Modelling, 36, 172-175.] develops a model to examine the production behavior of a regret averse competitive firm. Wong discusses the sufficient condition to ensure the conventional result that the optimal output level under uncertainty is less than that under certainty hold. Our contributions in this note are two-fold. Firstly, we point out that Wong's condition in terms of the first order derivatives of the utility function and the regret function is actually not sufficient. Secondly and more importantly, we show that a sufficient condition should be in terms of the relatively increase rate of the first order derivatives of the two functions. That's, it's the ratio of the risk aversion and regret aversion degree that matters. Our proposed condition requests that the firm should be not too regret averse.
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U2 - 10.1016/j.econmod.2014.05.031
DO - 10.1016/j.econmod.2014.05.031
M3 - Article
AN - SCOPUS:84902458429
VL - 41
SP - 312
EP - 315
JO - Economic Modelling
JF - Economic Modelling
SN - 0264-9993
ER -