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Transitive regret over statistically independent lotteries

Listed author(s):
  • Bikhchandani, Sushil
  • Segal, Uzi

Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. When each outcome in a random variable is compared with the parallel outcome in an alternative random variable, regret preferences are transitive iff they are expected utility. In this paper we show that when the choice set consists of pairwise statistically independent lotteries and the regret associated with each outcome is with respect to the entire alternative distribution, then transitive regret-based behavior is consistent with betweenness preferences and with a family of preferences that is characterized by a consistency property. Examples of consistent preferences include CARA, CRRA, and anticipated utility.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022053114000672
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 152 (2014)
Issue (Month): C ()
Pages: 237-248

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Handle: RePEc:eee:jetheo:v:152:y:2014:i:c:p:237-248
DOI: 10.1016/j.jet.2014.05.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Chew, S H & Epstein, Larry G & Segal, U, 1991. "Mixture Symmetry and Quadratic Utility," Econometrica, Econometric Society, vol. 59(1), pages 139-163, January.
  2. Chew, Soo Hong, 1983. "A Generalization of the Quasilinear Mean with Applications to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox," Econometrica, Econometric Society, vol. 51(4), pages 1065-1092, July.
  3. Safra, Zvi & Segal, Uzi, 1998. "Constant Risk Aversion," Journal of Economic Theory, Elsevier, vol. 83(1), pages 19-42, November.
  4. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  5. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-154, Summer.
  6. Fishburn, Peter C., 1983. "Transitive measurable utility," Journal of Economic Theory, Elsevier, vol. 31(2), pages 293-317, December.
  7. Dekel, Eddie, 1986. "An axiomatic characterization of preferences under uncertainty: Weakening the independence axiom," Journal of Economic Theory, Elsevier, vol. 40(2), pages 304-318, December.
  8. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
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