Regret Theory and Salience Theory: Total Strangers, Distant Relatives or Close Cousins?

Arbeitspapier

Two non-expected-utility-theory approaches to model decision making under risk are regret theory (Loomes and Sugden, 1982; Bell, 1982) and salience theory (Bordalo, Gennaioli, and Shleifer, 2012). While the psychological underpinning of these two approaches is different, the models share the assumption that within-state comparisons of outcomes across choice options are a key determinant of choice behavior. We investigate the overlap between the two theories and show that salience theory is a special case of regret theory. Moreover, we trace out the relationship be- tween diminishing sensitivity of the salience function and concavity of the choiceless utility function with regard to behavioral implications.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7445

Classification and Topics

• Classification: Wirtschaft ; 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: choice under risk ; regret theory ; salience theory

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Herweg, Fabian ; Müller, Daniel
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/198805
• Last update: 10.03.2025, 11:41 AM CET