Journal of Risk and Uncertainty

, Volume 11, Issue 3, pp 263–274 | Cite as

Regret aversion or event-splitting effects? more evidence under risk and uncertainty

  • Steven J. Humphrey
Article

Abstract

Recent experimental evidence has concluded that experimentally observed juxtaposition effects, as predicted by regret theory1, are largely attributable to “event-splitting effects” (ESEs) whereby the subjective decision weight attached to an outcome depends on the number of, as well as on the combined probability of, the disjoint events in which that outcome occurs. An experiment is reported that discriminates between juxtaposition effects and ESEs under conditions of both complete and incomplete information. The results confirm that juxtaposition effects are indeed largely due to ESEs and are robust over different informational conditions.

Key words

regret theory juxtaposition effects event-splitting effects anchoring effects 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Bell, David E. (1982). “Regret in Decision Making Under Uncertainty,”Operations Research 30, 961–981.Google Scholar
  2. Einhorn, Hillel J., and Robin M. Hogarth. (1986). “Decision Making Under Ambiguity,”Journal of Business 59, 5225–5250.Google Scholar
  3. Ellsberg, Daniel. (1961). “Risk, Ambiguity and the Savage Axioms,”Quarterly Journal of Economics 75, 643–669.Google Scholar
  4. Fishburn, Peter C. (1982). “Nontransitive Measurable Utility,”Journal of Mathematical Psychology 26, 31–67.Google Scholar
  5. Fishburn, Peter C. (1987). “Reconsiderations in the Theory of Choice Under Uncertainty,”Economic Journal 97, 825–841.Google Scholar
  6. Harless, David W. (1992). “Actions Versus Prospects: The Effects of problem Representation on Regret,”American Economic Review 82, 634–649.Google Scholar
  7. Holt, Charles A. (1986). “Preference Reversals and the Independence Axiom,”American Economic Review 76, 508–515.Google Scholar
  8. Kahneman, Daniel, and Amos Tversky. (1979). “Prospect Theory: An Analysis of Decision Under Risk,”Econometrica 47, 263–291.Google Scholar
  9. Loomes, Graham. (1988a). “When Actions Speak Louder than Prospects,”American Economic Review 78, 463–470.Google Scholar
  10. Loomes, Graham. (1988b). “Further Evidence of the Impact of Regret and Disappointment in Choice Under Uncertainty,”Economica 55, 47–62.Google Scholar
  11. Loomes, Graham, and Robert Sugden. (1982). “Regret Theory: An Alternative Theory of Choice Under Uncertainty,”Economic Journal 92, 805–824.Google Scholar
  12. Loomes, Graham, and Robert Sugden. (1987a). “Some Implications of a More General Form of Regret Theory,”Journal of Economic Theory 41, 270–287.Google Scholar
  13. Loomes, Graham, and Robert Sugden. (1987b). “Testing for Regret and Disappointment in Choice Under Uncertainty,”Economic Journal 97 (supplement), 118–129.Google Scholar
  14. Loomes, Graham, Chris Starmer, and Robert Sugden. (1992). “Are Preferences Monotonic? Testing Some Predictions of Regret Theory,”Economica 59, 17–33.Google Scholar
  15. Starmer, Chris. (1992). “Violations of Monotonicity –Regret Effects or Probability Processing Effects? An Experimental Test.” Discussion Paper No. 9218, The Economics Research Centre, University of East Anglia, Norwich.Google Scholar
  16. Starmer, Chris, and Robert Sugden. (1991). “Does the Random Lottery Procedure Elicit True Preferences? An Experimental Investigation,”American Economic Review 81, 425–439.Google Scholar
  17. Starmer, Chris, and Robert Sugden. (1993). “Testing for Juxtaposition Effects and Event-Splitting Effects,”Journal of Risk and Uncertainty 2, 159–178.Google Scholar
  18. Tversky, Amos and Daniel Kahneman. (1992). “Advances in Prospect Theory: Cumulative Representastion of Uncertainty,”Journal of Risk and Uncertainty 5, 297–323.Google Scholar

Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • Steven J. Humphrey
    • 1
  1. 1.Department of EconomicsUniversity of NottinghamUK

Personalised recommendations