IDEAS home Printed from https://ideas.repec.org/a/sae/envirb/v45y2018i5p842-863.html
   My bibliography  Save this article

Accounting for cognitive effort in random regret-only models: Effect of attribute variation and choice set size

Author

Listed:
  • Sunghoon Jang
  • Soora Rasouli
  • Harry Timmermans

Abstract

Behaviorally, regret-based choice models implicitly assume that individuals anticipate the amount of attribute-level regret by comparing the attribute levels of a considered choice alternative against the attribute levels of the best or all other choice alternatives. Arguing that the amount of effort depends on attribute variation and number of paired comparisons, we suggest a way of incorporating the effects of these factors into two regret-based choice models. The cognitive effort involved in anticipating the amount of regret in paired comparisons of choice alternatives is incorporated into the scale of the regret function of each alternative. Because more cognitive effort causes higher randomness in the assessment of the amount of regret (i.e. higher variance of error terms), the cognitive effort is expressed as a flexible heteroscedastic scale factor, which is a decreasing function of attribute variation and number of paired comparisons. The models are applied to two different data sets, and compared with a heteroscedastic multinomial logit model. Estimation results of the suggested flexible heteroscedastic random regret models show a significant improvement in predictive performance over their homoscedastic formulations. A similar but smaller improvement is obtained for multinomial logit models. These results imply that the conventional assumption of identically distributed error terms underlying random regret models may not sufficiently reflect the process of anticipating the amount of regret.

Suggested Citation

  • Sunghoon Jang & Soora Rasouli & Harry Timmermans, 2018. "Accounting for cognitive effort in random regret-only models: Effect of attribute variation and choice set size," Environment and Planning B, , vol. 45(5), pages 842-863, September.
    • Handle: RePEc:sae:envirb:v:45:y:2018:i:5:p:842-863
    DOI: 10.1177/0265813516688687
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0265813516688687
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0265813516688687?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    2. Caspar G. Chorus, 2012. "A Random Regret Minimization-based Discrete Choice Model," SpringerBriefs in Business, in: Random Regret-based Discrete Choice Modeling, edition 127, chapter 0, pages 5-15, Springer.
    3. Soora Rasouli & Harry Timmermans, 2017. "Specification of regret-based models of choice behaviour: formal analyses and experimental design based evidence," Transportation, Springer, vol. 44(6), pages 1555-1576, November.
    4. Bhat, Chandra R., 1995. "A heteroscedastic extreme value model of intercity travel mode choice," Transportation Research Part B: Methodological, Elsevier, vol. 29(6), pages 471-483, December.
    5. DeShazo, J. R. & Fermo, German, 2002. "Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 123-143, July.
    6. Quiggin, John, 1994. "Regret Theory with General Choice Sets," Journal of Risk and Uncertainty, Springer, vol. 8(2), pages 153-165, March.
    7. Swait, Joffre & Adamowicz, Wiktor, 2001. "The Influence of Task Complexity on Consumer Choice: A Latent Class Model of Decision Strategy Switching," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 28(1), pages 135-148, June.
    8. van Cranenburgh, Sander & Guevara, Cristian Angelo & Chorus, Caspar G., 2015. "New insights on random regret minimization models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 74(C), pages 91-109.
    9. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    10. Caspar G. Chorus, 2012. "Random Regret-based Discrete Choice Modeling," SpringerBriefs in Business, Springer, edition 127, number 978-3-642-29151-7, October.
    11. 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.
    12. Caussade, Sebastián & Ortúzar, Juan de Dios & Rizzi, Luis I. & Hensher, David A., 2005. "Assessing the influence of design dimensions on stated choice experiment estimates," Transportation Research Part B: Methodological, Elsevier, vol. 39(7), pages 621-640, August.
    13. Loomes, Graham & Sugden, Robert, 1983. "A Rationale for Preference Reversal," American Economic Review, American Economic Association, vol. 73(3), pages 428-432, June.
    14. Caspar G Chorus & Theo A Arentze & Harry J P Timmermans, 2009. "Spatial Choice: A Matter of Utility or Regret?," Environment and Planning B, , vol. 36(3), pages 538-551, June.
    15. Chorus, Caspar G., 2014. "Benefit of adding an alternative to one׳s choice set: A regret minimization perspective," Journal of choice modelling, Elsevier, vol. 13(C), pages 49-59.
    16. Moshe Ben-Akiva & Joffre Swait, 1986. "The Akaike Likelihood Ratio Index," Transportation Science, INFORMS, vol. 20(2), pages 133-136, May.
    17. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sunghoon Jang & Soora Rasouli & Harry Timmermans, 2017. "Incorporating psycho-physical mapping into random regret choice models: model specifications and empirical performance assessments," Transportation, Springer, vol. 44(5), pages 999-1019, September.
    2. Tian, Qi & Zhao, Jinhua, 2018. "Regret Minimization in Decision Making: Implications for Choice Modeling and Policy Design," 2018 Annual Meeting, August 5-7, Washington, D.C. 274016, Agricultural and Applied Economics Association.
    3. Peng Jing & Mengxuan Zhao & Meiling He & Long Chen, 2018. "Travel Mode and Travel Route Choice Behavior Based on Random Regret Minimization: A Systematic Review," Sustainability, MDPI, vol. 10(4), pages 1-20, April.
    4. Chorus, Caspar & van Cranenburgh, Sander & Dekker, Thijs, 2014. "Random regret minimization for consumer choice modeling: Assessment of empirical evidence," Journal of Business Research, Elsevier, vol. 67(11), pages 2428-2436.
    5. Mara Thiene & Marco Boeri & Caspar Chorus, 2012. "Random Regret Minimization: Exploration of a New Choice Model for Environmental and Resource Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(3), pages 413-429, March.
    6. Geržinič, Nejc & van Cranenburgh, Sander & Cats, Oded & Lancsar, Emily & Chorus, Caspar, 2021. "Estimating decision rule differences between ‘best’ and ‘worst’ choices in a sequential best worst discrete choice experiment," Journal of choice modelling, Elsevier, vol. 41(C).
    7. Caspar G. Chorus & Sander Cranenburgh, 2018. "Specification of regret-based models of choice behaviour: formal analyses and experimental design based evidence—commentary," Transportation, Springer, vol. 45(1), pages 247-256, January.
    8. Boeri, Marco & Longo, Alberto, 2017. "The importance of regret minimization in the choice for renewable energy programmes: Evidence from a discrete choice experiment," Energy Economics, Elsevier, vol. 63(C), pages 253-260.
    9. Herweg, Fabian & Müller, Daniel, 2021. "A comparison of regret theory and salience theory for decisions under risk," Journal of Economic Theory, Elsevier, vol. 193(C).
    10. 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.
    11. Giselle Moraes Ramos & Winnie Daamen & Serge Hoogendoorn, 2014. "A State-of-the-Art Review: Developments in Utility Theory, Prospect Theory and Regret Theory to Investigate Travellers' Behaviour in Situations Involving Travel Time Uncertainty," Transport Reviews, Taylor & Francis Journals, vol. 34(1), pages 46-67, January.
    12. Boeri, Marco & Longo, Alberto & Grisolía, José M. & Hutchinson, W. George & Kee, Frank, 2013. "The role of regret minimisation in lifestyle choices affecting the risk of coronary heart disease," Journal of Health Economics, Elsevier, vol. 32(1), pages 253-260.
    13. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    14. Qin, Jie, 2015. "A model of regret, investor behavior, and market turbulence," Journal of Economic Theory, Elsevier, vol. 160(C), pages 150-174.
    15. John Buckell & Vrinda Vasavada & Sarah Wordsworth & Dean A. Regier & Matthew Quaife, 2022. "Utility maximization versus regret minimization in health choice behavior: Evidence from four datasets," Health Economics, John Wiley & Sons, Ltd., vol. 31(2), pages 363-381, February.
    16. Fang Liu, 2021. "Regret theory under fear of the unknown," Papers 2108.01825, arXiv.org.
    17. Carlin, Bruce I. & Robinson, David T., 2009. "Fear and loathing in Las Vegas: Evidence from blackjack tables," Judgment and Decision Making, Cambridge University Press, vol. 4(5), pages 385-396, August.
    18. Chi, Yichun & Zhuang, Sheng Chao, 2022. "Regret-based optimal insurance design," Insurance: Mathematics and Economics, Elsevier, vol. 102(C), pages 22-41.
    19. Fujii, Yoichiro & Okura, Mahito & Osaki, Yusuke, 2021. "Is insurance normal or inferior? -A regret theoretical approach-," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    20. Emmanuelle GABILLON, 2020. "When choosing is painful: anticipated regret and psychological opportunity cost," Bordeaux Economics Working Papers 2020-04, Bordeaux School of Economics (BSE).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:envirb:v:45:y:2018:i:5:p:842-863. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.