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Regret theory: A new foundation

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  • Diecidue, Enrico
  • Somasundaram, Jeeva

Abstract

We present a new behavioral foundation for regret theory. The central axiom of this foundation — trade-off consistency — renders regret theory observable at the individual level and makes our foundation consistent with a recently introduced empirical and quantitative measurement method. Our behavioral foundation allows deriving a continuous regret theory representation and separating utility from regret. The axioms in our behavioral foundation clarify that regret theory minimally deviates from expected utility by relaxing transitivity only.

Suggested Citation

  • Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    • Handle: RePEc:eee:jetheo:v:172:y:2017:i:c:p:88-119
    DOI: 10.1016/j.jet.2017.08.006
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    More about this item

    Keywords

    Regret theory; Trade-off consistency; Expected utility; Transitivity;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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