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Regret Theory with General Choice Sets

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  • Quiggin, John

Abstract

The regret theory of choice under uncertainty proposed by Loomes and Sugden has performed well in explaining and predicting violations of Expected Utility theory. The original version of the model was confined to pairwise choices, which limited its usefulness as an economic theory of choice. Axioms for a more general form of regret theory have been proposed by Loomes and Sugden. In this article, it is shown that a simple non-manipulability requirement is sufficient to characterize the functional form for regret theory with general choice sets. The stochastic dominance and comparative static properties of the model are outlined. A number of special cases are derived in which regret theory is equivalent to other well-known theories of choice under uncertainty. Copyright 1994 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 8 (1994)
Issue (Month): 2 (March)
Pages: 153-65

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Handle: RePEc:kap:jrisku:v:8:y:1994:i:2:p:153-65

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Web page: http://www.springerlink.com/link.asp?id=100299

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Cited by:
  1. Lin, Jyh-Horng & Hung, Wei-Ming, 2013. "A barrier option framework for bank interest margin management under anticipatory regret aversion," Economic Modelling, Elsevier, vol. 33(C), pages 794-801.
  2. Wong, Kit Pong, 2012. "Production and insurance under regret aversion," Economic Modelling, Elsevier, vol. 29(4), pages 1154-1160.
  3. Boeri, Marco & Scarpa, Riccardo & Chorus, Caspar G., 2014. "Stated choices and benefit estimates in the context of traffic calming schemes: Utility maximization, regret minimization, or both?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 121-135.
  4. Tsai, Jeng-Yan, 2013. "Bank interest margin management based on a path-dependent Cobb–Douglas utility framework," Economic Modelling, Elsevier, vol. 35(C), pages 751-762.
  5. Wong, Kit Pong, 2014. "Regret theory and the competitive firm," Economic Modelling, Elsevier, vol. 36(C), pages 172-175.
  6. Tsai, Jeng-Yan, 2012. "Risk and regret aversions on optimal bank interest margin under capital regulation," Economic Modelling, Elsevier, vol. 29(6), pages 2190-2197.
  7. Eran Ben-Elia & Robert Ishaq & Yoram Shiftan, 2013. "“If only I had taken the other road...”: Regret, risk and reinforced learning in informed route-choice," Transportation, Springer, vol. 40(2), pages 269-293, February.
  8. Chorus, Caspar G. & Arentze, Theo A. & Timmermans, Harry J.P., 2008. "A Random Regret-Minimization model of travel choice," Transportation Research Part B: Methodological, Elsevier, vol. 42(1), pages 1-18, January.
  9. Martín Jorge Egozcue, 2012. "Gains from diversification: a regret theory approach," Economics Bulletin, AccessEcon, vol. 32(1), pages 204-219.
  10. Mara Thiene & Marco Boeri & Caspar Chorus, 2012. "Random Regret Minimization: Exploration of a New Choice Model for Environmental and Resource Economics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(3), pages 413-429, March.
  11. Butler, David J., 1998. "A choice-rule formulation of intransitive utility theory," Economics Letters, Elsevier, vol. 59(3), pages 323-329, June.
  12. Carlos Laciana & Elke Weber, 2008. "Correcting expected utility for comparisons between alternative outcomes: A unified parameterization of regret and disappointment," Journal of Risk and Uncertainty, Springer, vol. 36(1), pages 1-17, February.
  13. Broll, Udo & Ergozue, Martin & Welzel, Peter & Wong, Wing-Keung, 2013. "Optimal Output for the Regret-Averse Competitive Firm Under Price Uncertainty," MPRA Paper 51703, University Library of Munich, Germany.
  14. Muermann, Alexander & Mitchell, Olivia S. & Volkman, Jacqueline M., 2006. "Regret, portfolio choice, and guarantees in defined contribution schemes," Insurance: Mathematics and Economics, Elsevier, vol. 39(2), pages 219-229, October.

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