Multiattribute Regret: Theory and Experimental Study

Abstract

The aim of this paper is two-fold. The first part is to generalize the simple regret model by Bell (1982) and Loomes and Sugden (1982) to cope with the situation in which decision outcomes are multi-attributed. We propose a model which combines the simple regret model for ex ante preferences and the additive difference representation for ex post preferences. Then we show a necessary and sufficient axiomatization of our model under Savage’s framework. The proposed model is composed of three types of functions. One is a value function for each attribute. The others are attribute-dependent and holistic regret-rejoicing functions which respectively capture trade-offs among value-differences of chosen and forgone outcomes for each attribute and among all attributes. We also discuss constructive procedures and their consistency. The second part is to conduct an experiment to measure two attributes case. Participants were asked to join in a work to carry over heavy bags at some varying distances. The data supports the framing effect, that is, participants tend to have convex value functions in each attribute and indicate regret averse for weights and regret seeking for distances in gain frame. On the other hand, participants exhibit concave value functions for both attributes and regret seeking for weights and regret averse (almost regret neutral) for distances in loss frame.