Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314650 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11611
Publisher: 
CESifo GmbH, Munich
Abstract: 
We present a theory of context-dependent risk preferences under which within-state payoff comparisons and regret aversion shape decisions. Defining the attraction and compromise effect in reference to a state-space-based description of the choice problem, we show that our theory can account for both these prominent decoy effects. We test our theoretical predictions with an online experiment, including comparative statics results. We find strong evidence for the attraction and the compromise effect. Furthermore, we find some supportive evidence for our comparative static predictions and weakly diminishing sensitivity regarding ex-post regret.
Subjects: 
asymmetric dominance effect
attraction effect
compromise effect
context-dependent preferences
correlation-sensitive preferences
decoy effect
regret theory
JEL: 
C91
D010.D810
D91
M31
Document Type: 
Working Paper
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