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Regret aversion and opportunity dependence

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  • Hayashi, Takashi
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    Abstract

    This paper provides an axiomatic model of decision making under uncertainty in which the decision maker is driven by anticipated ex post regrets. Our model allows both regret aversion and likelihood judgement over states to coexist. Also, we characterize two special cases, minimax regret with multiple priors that generalizes Savage's minimax regret, and a smooth model of regret aversion.

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    File URL: http://www.sciencedirect.com/science/article/B6WJ3-4P6M693-1/1/dba4458da973b1c0835d91c10b4d6d63
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 139 (2008)
    Issue (Month): 1 (March)
    Pages: 242-268

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    Handle: RePEc:eee:jetheo:v:139:y:2008:i:1:p:242-268

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    Web page: http://www.elsevier.com/locate/inca/622869

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    Cited by:
    1. Zhe Yang & Yong Pu, 2012. "Existence and stability of minimax regret equilibria," Journal of Global Optimization, Springer, vol. 54(1), pages 17-26, September.
    2. Bikhchandani, Sushil & Segal, Uzi, 2011. "Transitive regret," Theoretical Economics, Econometric Society, vol. 6(1), January.
    3. Halpern, Joseph Y. & Pass, Rafael, 2012. "Iterated regret minimization: A new solution concept," Games and Economic Behavior, Elsevier, vol. 74(1), pages 184-207.
    4. Takashi Hayashi, 2011. "Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret," Theory and Decision, Springer, vol. 70(4), pages 399-430, April.
    5. Takashi Hayashi, 2008. "Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret," KIER Working Papers 659, Kyoto University, Institute of Economic Research.
    6. Joseph Y. Halpern & Samantha Leung, 2012. "Weighted Sets of Probabilities and MinimaxWeighted Expected Regret: New Approaches for Representing Uncertainty and Making Decisions," Papers 1210.4853, arXiv.org.
    7. Kostanjcar, Zvonko & Jeren, Branko & Juretic, Zeljan, 2012. "Impact of uncertainty in expected return estimation on stock price volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5563-5571.
    8. Tetenov, Aleksey, 2012. "Statistical treatment choice based on asymmetric minimax regret criteria," Journal of Econometrics, Elsevier, vol. 166(1), pages 157-165.
    9. Dirk Bergemann & Karl Schlag, 2005. "Robust Monopoly Pricing," Cowles Foundation Discussion Papers 1527RR, Cowles Foundation for Research in Economics, Yale University, revised Sep 2008.
    10. Iverson, Terrence, 2013. "Minimax regret discounting," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 598-608.
    11. Ludovic Renou & Karl H. Schlag, 2009. "Implementation in Minimax Regret Equilibrium," Discussion Papers in Economics 09/24, Department of Economics, University of Leicester.
    12. Hayashi, Takashi, 2009. "Stopping with anticipated regret," Journal of Mathematical Economics, Elsevier, vol. 45(7-8), pages 479-490, July.
    13. Lucia Marchegiani & Tommaso Reggiani & Matteo Rizzolli, 2013. "Severity vs. Leniency Bias in Performance Appraisal: Experimental evidence," BEMPS - Bozen Economics & Management Paper Series BEMPS01, School of Economics and Management at the Free University of Bozen.
    14. Daniel Krähmer & Rebecca Stone, 2013. "Anticipated regret as an explanation of uncertainty aversion," Economic Theory, Springer, vol. 52(2), pages 709-728, March.

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