Regret theory: State dominance and expected utility

Publication date: August 2017 Source:Journal of Mathematical Psychology, Volume 79 Author(s): Haim Levy Choices made according to regret theory ( R T ) may violate the expected utility ( E U ) model. We propose a stochastic dominance ( S D ) method for comparing R T and E U paradigms holistically, without focusing on a specific axiom or on a specific numerical example. We show that in some important cases, including the two-state case, e.g., war or peace, Republican or Democratic Party winning the Presidential election etc., R T does not violate both E U and Cumulative Prospect Theory ( C P T ). Obviously, when E U is not violated by R T the economic results derived under E U are intact also under R T .

Source: Journal of Mathematical Psychology - May 31, 2017 Category: Psychiatry & Psychology Source Type: research