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Expectations, Disappointment, and Rank-Dependent Probability Weighting


  • Philippe Delquié


  • Alessandra Cillo


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

Suggested Citation

  • Philippe Delquié & Alessandra Cillo, 2006. "Expectations, Disappointment, and Rank-Dependent Probability Weighting," Theory and Decision, Springer, vol. 60(2), pages 193-206, May.
  • Handle: RePEc:kap:theord:v:60:y:2006:i:2:p:193-206 DOI: 10.1007/s11238-005-4571-3

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    References listed on IDEAS

    1. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
    2. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
    3. Weil, Philippe, 1989. "The equity premium puzzle and the risk-free rate puzzle," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 401-421, November.
    4. Beattie, Jane & Loomes, Graham, 1997. "The Impact of Incentives upon Risky Choice Experiments," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 155-168, March.
    5. Abel, Andrew B., 2002. "An exploration of the effects of pessimism and doubt on asset returns," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1075-1092, July.
    6. Douglas Stevens & Arlington Williams, 2004. "Inefficiency in Earnings Forecasts: Experimental Evidence of Reactions to Positive vs. Negative Information," Experimental Economics, Springer;Economic Science Association, vol. 7(1), pages 75-92, February.
    7. Masako N. Darrough, 2002. "A Positive Model of Earnings Forecasts: Top Down versus Bottom Up," The Journal of Business, University of Chicago Press, vol. 75(1), pages 127-152, January.
    8. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
    9. Ritov, Ilana, 1996. "Probability of Regret: Anticipation of Uncertainty Resolution in Choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 66(2), pages 228-236, May.
    10. Giordani, Paolo & Soderlind, Paul, 2006. "Is there evidence of pessimism and doubt in subjective distributions? Implications for the equity premium puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 30(6), pages 1027-1043, June.
    11. Clotilde Napp & Elyès Jouini, 2006. "Heterogeneous Beliefs and Asset Pricing in Discrete Time," Post-Print halshs-00151536, HAL.
    12. repec:bla:joares:v:35:y:1997:i::p:167-199 is not listed on IDEAS
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    Cited by:

    1. Abdellaoui, Mohammed & Bleichrodt, Han, 2007. "Eliciting Gul's theory of disappointment aversion by the tradeoff method," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 631-645, 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.
    3. Dan Anderberg & Claudia Cerrone, 2014. "Education, Disappointment and Optimal Policy," CESifo Working Paper Series 5141, CESifo Group Munich.
    4. repec:eee:proeco:v:191:y:2017:i:c:p:170-177 is not listed on IDEAS
    5. 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.


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