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Expectations, Disappointment, and Rank-Dependent Probability Weighting

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  • Philippe Delquié

    ()

  • Alessandra Cillo

Abstract

We develop a model of Disappointment in which disappointment and elation arise from comparing the outcome received, not with an expected value as in previous models, but rather with the other individual outcomes of the lottery. This approach may better reflect the way individuals are liable to experience disappointment. The model obtained accounts for classic behavioral deviations from the normative theory, offers a richer structure than previous disappointment models, and leads to a Rank-Dependent Utility formulation in a transparent way. Thus, our disappointment model may provide a clear psychological rationale for the subjective transformation of probabilities. Copyright Springer 2006

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File URL: http://hdl.handle.net/10.1007/s11238-005-4571-3
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Bibliographic Info

Article provided by Springer in its journal Theory and Decision.

Volume (Year): 60 (2006)
Issue (Month): 2 (05)
Pages: 193-206

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Handle: RePEc:kap:theord:v:60:y:2006:i:2:p:193-206

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Web page: http://www.springerlink.com/link.asp?id=100341

Related research

Keywords: disappointment theory; expected utility violations; probability weighting; rank-dependent utility;

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Cited by:
  1. Philippe Delquié & Alessandra Cillo, 2006. "Disappointment without prior expectation: a unifying perspective on decision under risk," Journal of Risk and Uncertainty, Springer, vol. 33(3), pages 197-215, December.
  2. David Gill & Victoria Prowse, 2012. "A Structural Analysis of Disappointment Aversion in a Real Effort Competition," American Economic Review, American Economic Association, vol. 102(1), pages 469-503, February.

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