Similarity judgments in choice under uncertainty: a reinterpretation of the predictions of regret theory

Article Abstract:

A study was conducted to test whether the frequencies in which violations of stochastic dominance, invariance, and the independence of axiom are sensitive to the way choices are presented under uncertainty as implied by Regret theory. A framework of choice based on similarity judgments was utilized in the study. It supported the systematic violations of axioms and assumed no transformation of alternatives. Behaviors were viewed as rational within the context of Regret theory while choice between two acts were minimized by exploiting skew symmetry properties. Results showed that individuals depend on similarity judgments to render choices. Findings also suggested that similarity decisions influence violations of expected utility.

Decision-making, Decision making, Analysis, Choice (Psychology), Stochastic processes, Uncertainty

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The effect of regret on optimal bidding in auctions

Article Abstract:

The effects of regret on competitive bidding situations are examined. Bidders' outcome utilities are allowed to depend on their perceptions of profit and any regrets they feel for winning or losing the bid. Bid winners might feel regret for 'leaving money on the table' while bid losers might feel regret for seeing an item sell for less than their perceived value of it. Results indicate that optimal bidding strategies will not be effected by profit versus regret provided that both types of regret are weighed evenly. Results also show that bid takers suffer if they weigh 'money left on the table' regret more heavily, and if losers do not learn the winner's price.

Psychological aspects, Research, Letting of contracts, Competitive bidding, Auctions

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Risk Premiums for Decision Regret

Article Abstract:

Many people find making decisions under uncertain conditions difficult. They fear making less than the best decision. These people may be willing to pay a premium to avoid making a less than optimal decision. The behavioral implications of avoiding decision regret is investigated. Decision makers often prefer not to hear of the resolution of foregone lotteries.

Management science, Risk management, Problem solving, Decision theory, Criteria, Decision Making, Risk Analysis

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