Regret vs' Disappointment theory

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Regret vs. Disappointment theory

• Pavlo R. Blavatskyy

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Disappointment theory

• Initial idea Bell (1985), Loomes and Sugden
  (1986)
• Established model Gul (1991)
• Prospect based model
• Disappointment is a psychological reaction to a
  choice outcome that does not meet ones
  expectation

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Disappointment theory continued

• Bell ones psychological expectation EV
• Individual is disappointed when an outcome worse
  than EV occurs

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Disappointment theory example

• L1 9 with certainty
• L2 (0, 0.9 100, 0.1)
• Value of L2 is likely to be lower than value of
  L1
• because L2 allows for possibility to receive 0
  lt EV (L2)

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Regret theory

• Initial idea Bell (1982, 83), Loomes and Sugden
  (1982)
• Established model Loomes and Sugden (1987)
• Comparison between a chosen prospect and a
  foregone prospect
• Special case of Fishburn (1988)
• SSB theory

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Regret theorycontinued

• Regret is a psychological reaction to a choice of
  a prospect whose performance is worse than the
  performance of a foregone prospect

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Regret theoryformula

• States of the world s1, , sn

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Regret theory example

• State s1 (s3) causes regret when L1 (L2) is chosen