Disappointment Aversion and Expectiles

Fabio Bellini, Fabio Maccheroni, Tiantian Mao, Ruodu Wang and Qinyu Wu

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Abstract: This paper recasts Gul's (1991) theory of disappointment aversion in a Savage framework, with general outcomes, new explicit axioms of disappointment aversion, and novel explicit representations. These permit broader applications of the theory and a better understanding of its decision-theoretic foundations. Our results exploit an unexpected connection between Gul's model and the econometric framework of Newey and Powell (1987) of asymmetric least squares estimation. Our main axiomatization result shows that a preference relation over Savage acts is probabilistically sophisticated, invariant biseparable, and disappointment hedging if and only if it admits a representation \emph{\`a la} Gul, and hence all explicit equivalent representations that we present in the paper. We also derive a neurocomputational foundation of the theory based on recent neuroscience findings and a novel reinforcement learning result.

Date: 2025-08, Revised 2026-07
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