Anticipating Regret: Why Fewer Options May Be Better

Sarver, Todd

doi:10.1111/j.0012-9682.2008.00834.x

Cited by 103 publications

(75 citation statements)

References 19 publications

(31 reference statements)

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“…The correlation between the two is 0.65, 95% CI [0.45, 0.79]. In other words, the addition of feedback increased the choice rate of the prospect that minimizes the probability of the regret a decision maker experiences after observing he (25, .75; 26) or she selected the option that generated the lower payoff in a particular trial (see related ideas in Hart, 2005;Loomes & Sugden, 1982;Sarver, 2008). in which it moved participants away from maximization.…”

Section: Full Information Problems Analysis Of the 46 Full Informatimentioning

confidence: 99%

From anomalies to forecasts: Toward a descriptive model of decisions under risk, under ambiguity, and from experience.

Erev¹,

Ert

Plonsky³

et al. 2017

Psychological Review

210

258

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Experimental studies of choice behavior document distinct, and sometimes contradictory, deviations from maximization. For example, people tend to overweight rare events in oneshot decisions under risk, and to exhibit the opposite bias when they rely on past experience.The common explanations of these results assume that the contradicting anomalies reflect situation-specific processes that involve the weighting of subjective values and the use of simple heuristics. The current paper analyzes 14 choice anomalies that have been described by different models, including the Allais, St. Petersburg, and Ellsberg paradoxes, and the reflection effect. Next, it uses a choice prediction competition methodology to clarify the interaction between the different anomalies. It focuses on decisions under risk (known payoff distributions) and under ambiguity (unknown probabilities), with and without feedback concerning the outcomes of past choices. The results demonstrate that it is not necessary to assume situation-specific processes. The distinct anomalies can be captured by assuming high sensitivity to the expected return and four additional tendencies: pessimism, bias toward equal weighting, sensitivity to payoff sign, and an effort to minimize the probability of immediate regret. Importantly, feedback increases sensitivity to probability of regret. Simple abstractions of these assumptions, variants of the model Best Estimate And Sampling Tools (BEAST), allow surprisingly accurate ex ante predictions of behavior. Unlike the popular models, BEAST does not assume subjective weighting functions or cognitive shortcuts.Rather, it assumes the use of sampling tools and reliance on small samples, in addition to the estimation of the expected values.

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Section: Full Information Problems Analysis Of the 46 Full Informatimentioning

confidence: 99%

From anomalies to forecasts: Toward a descriptive model of decisions under risk, under ambiguity, and from experience.

Erev¹,

Ert

Plonsky³

et al. 2017

Psychological Review

210

258

View full text Add to dashboard Cite

show abstract

“…Filiz‐Ozbay and Ozbay () and Engelbrecht‐Wiggans and Katok () explain how regret theory can explain overbidding in first price auctions. Other regret models include Sarver () and Hayashi (). These models differ from LS in that they study preferences over menus, i.e.…”

Section: Recent Applicationsmentioning

confidence: 99%

Regret Theory: A Bold Alternative to the Alternatives

Bleichrodt

Wakker

2015

The Economic Journal

134

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“…The next axiom captures an important aspect of our model of costly contemplation: 5 Similar L-continuity axioms are used in Dekel, Lipman, Rustichini, and Sarver (2007) (henceforth DLRS) and Sarver (2008). There is also a connection between our L-continuity axiom and the properness condition proposed by Mas-Colell (1986…”

Section: Axiom 1-weak Ordermentioning

confidence: 99%

A Unique Costly Contemplation Representation

Ergin

Sarver

2010

Econometrica

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We study preferences over menus which can be represented as if the individual is uncertain of her tastes, but is able to engage in costly contemplation before selecting an alternative from a menu. Since contemplation is costly, our key axiom, aversion to contingent planning, reflects the individual's preference to learn the menu from which she will be choosing prior to engaging in contemplation about her tastes for the alternatives. Our representation models contemplation strategies as subjective signals over a subjective state space. The subjectivity of the state space and the information structure in our representation makes it difficult to identify them from the preference. To overcome this issue, we show that each signal can be modeled in reduced form as a measure over ex post utility functions without reference to a state space. We show that in this reduced-form representation, the set of measures and their costs are uniquely identified. Finally, we provide a measure of comparative contemplation costs and characterize the special case of our representation where contemplation is costless. Copyright 2010 The Econometric Society.

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Anticipating Regret: Why Fewer Options May Be Better

Cited by 103 publications

References 19 publications

From anomalies to forecasts: Toward a descriptive model of decisions under risk, under ambiguity, and from experience.

From anomalies to forecasts: Toward a descriptive model of decisions under risk, under ambiguity, and from experience.

Regret Theory: A Bold Alternative to the Alternatives

A Unique Costly Contemplation Representation

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