Regret Theory: A Bold Alternative to the Alternatives

Bleichrodt, Han; Wakker, Peter P.

doi:10.1111/ecoj.12200

Cited by 133 publications

(54 citation statements)

References 104 publications

(142 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…2 Bleichrodt and Wakker (2015) recently published a survey of regret theory on the occasion of the 125th anniversary of the Economic Journal, recognizing the Loomes-Sugden's paper as one of the most pioneering publications of that journal.…”

Section: Introductionmentioning

confidence: 99%

Aversion to risk of regret and preference for positively skewed risks

Gollier

2018

Econ Theory

View full text Add to dashboard Cite

We assume that the ex-post utility of an agent facing a menu of lotteries depends upon the actual payoff together with its forgone best alternative, thereby allowing for the expost emotion of regret. An increase in the risk of regret is obtained when the actual payoff and its forgone best alternative are statistically less concordant in the sense of Tchen (1980). The aversion to any such risk of regret is thus equivalent to the supermodularity of the bivariate utility function. We show that more regret-risk-averse agents are more willing to choose the risky act in a one-risky-one-safe menu, in particular when the payoff of the risky choice is highly skewed. This is compatible with the "possibility effect" that is well documented in prospect theory. Symmetrically, we define the aversion to elationrisk that can prevail when the ex-post utility is alternatively sensitive to the forgone worst payoff. We show that elation-risk-seeking is compatible with the "certainty effect". We finally show that regret-risk-averse and elation-risk-seeking people behave as if they had rank-dependent utility preferences with an inverse-S shaped probability weighting function that reproduces estimates existing in the literature.

show abstract

Section: Introductionmentioning

confidence: 99%

Aversion to risk of regret and preference for positively skewed risks

Gollier

2018

Econ Theory

View full text Add to dashboard Cite

show abstract

“…2). This type of framing exempts the complaints that the information is distorted by the event-splitting effect (Bleichrodt and Wakker, 2015). To visualize the values of the attributes, both outcomes and probabilities are graphically represented by bar charts.…”

Section: Problem Statement Regionmentioning

confidence: 99%

“…Many previous experiments only provides visualization for probabilities (e.g. (Bleichrodt and Wakker, 2015)). This unbalanced presentation has the potential to introduce bias between different types of attributes.…”

Section: Problem Statement Regionmentioning

confidence: 99%

A Human-Computer Interface Design for Quantitative Measure of Regret Theory

Jiang

Wang

2019

IFAC-PapersOnLine

View full text Add to dashboard Cite

Regret theory is a theory that describes human decision-making under risk. The key of obtaining a quantitative model of regret theory is to measure the preference in humans' mind when they choose among a set of options. Unlike physical quantities, measuring psychological preference is not procedure invariant, i.e. the readings alter when the methods change. In this work, we alleviate this influence by choosing the procedure compatible with the way that an individual makes a choice. We believe the resulting model is closer to the nature of human decision-making. The preference elicitation process is decomposed into a series of short surveys to reduce cognitive workload and increase response accuracy. To make the questions natural and familiar to the subjects, we follow the insight that humans generate, quantify and communicate preference in natural language. The fuzzy sets theory is hence utilized to model responses from subjects. Based on these ideas, a graphical human-computer interface (HCI) is designed to articulate the information as well as to efficiently collect human responses. The design also accounts for human heuristics and biases, e.g. range effect and anchoring effect, to enhance its reliability. The overall performance of the survey is satisfactory because the measured model shows prediction accuracy equivalent to the subjects revisit performance.

show abstract

“…Accordingly, they take the position that if a decision-maker experiences such feelings, taking them into account for decision-making should not be seen as irrational. For a detailed critique of this argument see Bleichrodt and Wakker (2015).…”

Section: The Anscombe-aumann Monotonicity Axiommentioning

confidence: 99%

An Experimental Test of the Anscombe–Aumann Monotonicity Axiom

Schneider

Schonger

2019

Management Science

View full text Add to dashboard Cite

Abstract. Most models of ambiguity aversion satisfy Anscombe-Aumann's Monotonicity axiom.Monotonicity imposes separability of preferences across events that occur with unknown probability. We construct a test of Monotonicity by modifying the Allais paradox to a setting with both subjective and objective uncertainty. Two experimental studies are conducted: while study 1 uses U.S. online workers and a natural source of ambiguity, study 2 employs European students and an Ellsberg urn. In both studies, modal behavior violates Monotonicity in a specific, intuitive way. Overall, our data suggest that violations of Monotonicity are as prevalent as violations of von Neumann-Morgenstern's Independence axiom.

show abstract

Regret Theory: A Bold Alternative to the Alternatives

Abstract: In their famous 1982 paper in this Journal, Loomes and Sugden introduced regret theory. Now, more than 30 years later, the case for the historical importance of this contribution can be made.

Cited by 133 publications

References 104 publications

Aversion to risk of regret and preference for positively skewed risks

Aversion to risk of regret and preference for positively skewed risks

A Human-Computer Interface Design for Quantitative Measure of Regret Theory

An Experimental Test of the Anscombe–Aumann Monotonicity Axiom

Contact Info

Product

Resources

About