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Are Preferences Monotonic? Testing Some Predictions of Regret Theory

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  • Loomes, Graham
  • Starmer, Chris
  • Sugden, Robert

Abstract

In this paper, the authors demonstrate that the assumption of "regret aversion," which has been invoked in regret theory to explain several well-documented violations of expected utility theory, also implies the existence of strict preferences between some stochastically equivalent actions and implies certain systematic violations of monotonicity. The authors report an experimental test of these predictions. They find that, while choices between stochastically equivalent actions are entirely consistent with expected utility theory, there is clear evidence of the monotonicity violations predicted by regret theory. Copyright 1992 by The London School of Economics and Political Science.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 59 (1992)
Issue (Month): 233 (February)
Pages: 17-33

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Handle: RePEc:bla:econom:v:59:y:1992:i:233:p:17-33

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Cited by:
  1. Freemantle, Nick, 1996. "Are decisions taken by health care professionals rational? A non systematic review of experimental and quasi experimental literature," Health Policy, Elsevier, vol. 38(2), pages 71-81, November.
  2. Wong, Kit Pong, 2014. "Regret theory and the competitive firm," Economic Modelling, Elsevier, vol. 36(C), pages 172-175.
  3. Michele Bernasconi, 2002. "How should income be divided? questionnaire evidence from the theory of “Impartial preferences”," Journal of Economics, Springer, vol. 9(1), pages 163-195, December.
  4. Bruno S. Frey, . "Knight Fever towards an Economics of Awards," IEW - Working Papers 239, Institute for Empirical Research in Economics - University of Zurich.
  5. Hirigoyen, Gérard & Labaki, Rania, 2012. "The role of regret in the owner-manager decision-making in the family business: A conceptual approach," Journal of Family Business Strategy, Elsevier, vol. 3(2), pages 118-126.
  6. Wong, Kit Pong, 2012. "Production and insurance under regret aversion," Economic Modelling, Elsevier, vol. 29(4), pages 1154-1160.
  7. Starmer, C., 1998. "Experimental Economics: Hard Science or Wasteful Tinkering," University of East Anglia Discussion Papers in Economics 9802, School of Economics, University of East Anglia, Norwich, UK..
  8. Krähmer, Daniel & Stone, Rebecca, 2005. "Regret in Dynamic Decision Problems," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 71, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Smith, Richard David, 1996. "Is Regret Theory an alternative basis for estimating the value of healthcare interventions?," Health Policy, Elsevier, vol. 37(2), pages 105-115, August.
  10. Roth, Gerrit, 2006. "Predicting the Gap between Willingness to Accept and Willingness to Pay," Munich Dissertations in Economics 4901, University of Munich, Department of Economics.
  11. Chris Starmer, 1996. "Explaining risky choices without assuming preferences," Social Choice and Welfare, Springer, vol. 13(2), pages 201-213, April.
  12. Han Bleichrodt & Jose Luis Pinto-Prades, 2006. "A New Type of Preference Reversal," Working Papers 06.18, Universidad Pablo de Olavide, Department of Economics.
  13. Humphrey, Steven J., 1996. "Do anchoring effects underlie event-splitting effects? An experimental test," Economics Letters, Elsevier, vol. 51(3), pages 303-308, June.

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