This paper examines the behavior of the regret-averse firm under exchange rate uncertainty. Regret-averse preferences are characterized by a modified utility function that includes disutility from having chosen ex-post suboptimal alternatives. We show that the conventional results that the firm...

In a simple three-stage model of an international Cournot duopoly, optimal strategic trade policy is shown to be time inconsistent. If the domestic government first announces a production subsidy, firms then irrevocably commit resources to R&D, and finally play their output game, there is an...