A Comparison of Regret Theory and Salience Theory for Decisions under Risk

Fabian Herweg () and Daniel Müller

No 7445, CESifo Working Paper Series from CESifo

Abstract: Two non-transitive theories to model decision making under risk are regret theory (Loomes and Sugden, 1982, 1987) 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 these theories and show that original regret theory (Loomes and Sugden, 1982) is a special case of salience theory (Bordalo, Gennaioli, and Shleifer, 2012), which itself is a special case of generalized regret theory (Loomes and Sugden, 1987).

Keywords: choice under risk; regret theory; salience theory (search for similar items in EconPapers)
JEL-codes: D81 D91 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cbe, nep-mic and nep-upt
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Related works:
Journal Article: A comparison of regret theory and salience theory for decisions under risk (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7445

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