TY - JOUR
T1 - Production theory under price uncertainty for firms with disappointment aversion
AU - Guo, Xu
AU - Egozcue, Martín
AU - Wong, Wing Keung
N1 - Funding Information:
The authors would also like acknowledge the financial support by National Natural Science Foundation of China (11701034), National Social Science Fund of China (NSSFC-16BTJ013, NSSFC-16ZDA010), Sichuan Project of Science and Technology (2017JY0273), ANII, Universidad de Montevideo, Asia University, China Medical University Hospital, Hang Seng University of Hong Kong, the Research Grants Council of Hong Kong (Project Number 12500915) and Ministry of Science and Technology (MOST), Taiwan (Project Numbers 106-2410-H-468-002 and 107-2410-H-468-002-MY3). The second author would like to thanks comments by Maria Belen Egozcue. The third author would also like to thank Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. The authors are grateful to the Editor-in-Chief, Alexandre Dolgui, the associate editor and two anonymous referees for substantive comments that have significantly improved this manuscript.
Publisher Copyright:
© 2020 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2021
Y1 - 2021
N2 - This paper studies the production theory of the competitive firm under price uncertainty by adopting four of the most well-established models of disappointment aversion. Our results show that a disappointment-averse firm will generally produce less than a risk-averse firm. Further, the disappointment-averse firm's optimal output level will surely decrease with an increase in the disappointment coefficients. Moreover, the optimal outputs among the four disappointment-averse models are not the same. As a real case example, we apply our models to determine the optimal building heights for new buildings in Punta del Este, Uruguay. In this example, our disappointment averse models' predictions are very close to the observed heights of these new projects.
AB - This paper studies the production theory of the competitive firm under price uncertainty by adopting four of the most well-established models of disappointment aversion. Our results show that a disappointment-averse firm will generally produce less than a risk-averse firm. Further, the disappointment-averse firm's optimal output level will surely decrease with an increase in the disappointment coefficients. Moreover, the optimal outputs among the four disappointment-averse models are not the same. As a real case example, we apply our models to determine the optimal building heights for new buildings in Punta del Este, Uruguay. In this example, our disappointment averse models' predictions are very close to the observed heights of these new projects.
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U2 - 10.1080/00207543.2020.1733699
DO - 10.1080/00207543.2020.1733699
M3 - Article
AN - SCOPUS:85081252283
SN - 0020-7543
VL - 59
SP - 2392
EP - 2405
JO - International Journal of Production Research
JF - International Journal of Production Research
IS - 8
ER -