Between Commitment and Flexibility: Revealing Anticipated Regret and Elation

Daniele Pennesi ()

No 71, Working papers from Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino

Abstract: This paper introduces and characterizes behaviorally a model of choice over menus of actions in which the individual experiences regret or elation if, after uncertainty resolves, the choice from the menu is inferior or superior to available alternatives. The revealed preference charac- terization of the model combines two contrasting forces: a preference for having fewer options in order to reduce ex post regret, and a preference for having more options in order to increase ex post elation. An application of the model to information acquisition shows that instrumen- tal information is always valuable. Anticipated elation drives an apparently irrational aversion to delegate choices to an informed agent. Lastly, anticipated elation also generates a desire to include options that will not be selected from the menu, a behavior that is often ascribed to naive time-inconsistency.

Keywords: Regret; Elation; Flexibility; Commitment; Information. (search for similar items in EconPapers)
JEL-codes: D01 D91 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2021-06
New Economics Papers: this item is included in nep-mic
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