Measuring regret theory in the health and financial domain

Henrik Andersson, Henrik Scholtz and Jiakun Zheng
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Henrik Andersson: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Henrik Scholtz: UZH - Universität Zürich [Zürich] = University of Zurich
Jiakun Zheng: School of Finance at Renmin University of China

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Abstract: This paper applies an experimental design developed by Bleichrodt et al. (2010) to test the key assumption of original regret theory (Loomes and Sugden, 1982): convexity of the regret function. We elicit preferences for financial and health outcomes for about 1,000 subjects, yielding some evidence of minor dierences between financial domain and health domain. While aggregate results seem to support regret theory at first sight, individual-level analyses show that the majority of subjects violate the predictions of regret theory with a convex regret function. Our results thus challenge the predictive accuracy of regret theory as a descriptive theory of decision-making under risk.

Keywords: Original regret theory; Decision under uncertainty; Utility measurement; Online experiments (search for similar items in EconPapers)
Date: 2025-02-24
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