Ignorance is bliss: A game of regret

Arbeitspapier

Existing models of regret aversion assume that individuals can make an ex-post comparison between their choice and a foregone alternative. Yet in many situations such a comparison can be made only if someone else chose the alternative option. We develop a model where regret-averse agents must decide between the status quo and a new risky option that outperforms the status quo in expectation, and learn the outcome of the risky option, if unchosen, with a probability that depends on the choices of others. This turns what was previously a series of single-person decision problems into a coordination game. Most notably, regret can facilitate coordination on the status quo - an action that would not be observed if the agents were acting in isolation or had standard preferences. We experimentally test the model and find that regret-averse agents behave as predicted by our theory.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers of the Max Planck Institute for Research on Collective Goods ; No. 2019/10

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Design of Experiments: Laboratory, Group Behavior ; Criteria for Decision-Making under Risk and Uncertainty ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Subject: regret aversion ; coordination games ; information

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Cerrone, Claudia ; Feri, Francesco ; Neary, Philip R.
• Event: Veröffentlichung
• (who): Max Planck Institute for Research on Collective Goods
• (where): Bonn
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/204708
• Last update: 10.03.2025, 11:43 AM CET