Aspects of Regret Theory and Disappointment Theory As Alternatives to the Expected Utility Hypothesis

Abstract

Regret and disappointment theory (R and D-theory) are discussed as alternatives to the expected utility hypothesis (EUH). The discussion is relative to a choice between two actions, where the consequences from each action are influenced from respectively two different sets of states of the world. A distinction is made between independence and dependence between the two sets of states of the world. Furthermore, at the time of experience from a choice it is distinguished between full information and no information of the occurrence of state of the world related to the action not chosen. Decision criteria based on R and D-theory are compared with decision criteria based on EUH. In R-theory, the choice of action depends of independence/dependence and information/not information. In D-theory such distinctions make no difference with respect to choice of action.