Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198805 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7445
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Two non-expected-utility-theory approaches to model decision making under risk are regret theory (Loomes and Sugden, 1982; Bell, 1982) and salience theory (Bordalo, Gennaioli, and Shleifer, 2012). While the psychological underpinning of these two approaches is different, the models share the assumption that within-state comparisons of outcomes across choice options are a key determinant of choice behavior. We investigate the overlap between the two theories and show that salience theory is a special case of regret theory. Moreover, we trace out the relationship be- tween diminishing sensitivity of the salience function and concavity of the choiceless utility function with regard to behavioral implications.
Subjects: 
choice under risk
regret theory
salience theory
JEL: 
D81
D91
Document Type: 
Working Paper
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