Regret theory: State dominance and expected utility

摘要

Choices made according to regret theory (RT) may violate the expected utility (EU) model. We propose a stochastic dominance (SD) method for comparing RT and EU paradigms holistically, without focusing on a specific axiom or on a specific numerical example. We show that in some important cases, including the two-state case, e.g., war or peace, Republican or Democratic Party winning the Presidential election etc., RT does not violate both EU and Cumulative Prospect Theory (CPT). Obviously, when EU is not violated by RT the economic results derived under EU are intact also under RT. (C) 2017 Elsevier Inc. All rights reserved.