Transitive Regret Over Statistically Independent Lotteries
17 Pages Posted: 19 Apr 2012
Date Written: March 31, 2012
Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. We show that when the choice set consists of pairwise statistically independent lotteries, transitive regret-based behavior is consistent with betweenness preferences and with a family of preferences that is characterized by a consistency property. Examples of consistent preferences include CARA, CRRA, and anticipated utility.
Keywords: regret, transitivity, non-expected utility
JEL Classification: D81
Suggested Citation: Suggested Citation