Professor of Decision Sciences
JEL Classification; D81; Regret theory; Trade-off consistency; Expected utility; Transitivity;
Journal Article | Journal of Economic Theory | 172 | November 2017
Regret Theory: A New Foundation
The authors present a new behavioral foundation for regret theory. The central axiom of this foundation — trade-off consistency — renders regret theory observable at the individual level and makes our foundation consistent with a recently introduced empirical and quantitative measurement method.Their behavioral foundation allows deriving a continuous regret theory representation and separating utility from regret. The axioms in that behavioral foundation clarify that regret theory minimally deviates from expected utility by relaxing transitivity only.