Ignorance is bliss: a game of regret / Claudia Cerrone/Francesco Feri/Philip R. Neary
VerfasserCerrone, Claudia ; Feri, Francesco ; Neary, Philip R.
ErschienenBonn : Max Planck Institute for Research on Collective Goods, July 2019
Elektronische Ressource
Umfang1 Online-Ressource (34 Seiten) : Diagramme
SerieDiscussion papers of the Max Planck Institute for Research on Collective Goods ; 2019/10
 Das Dokument ist öffentlich zugänglich im Rahmen des deutschen Urheberrechts.
Ignorance is bliss: a game of regret [0.6 mb]
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Existing models of regret aversion assume that individuals can make an ex-post comparison between their choice and a foregone alternative. Yet in many situations such a comparison can be made only if someone else chose the alternative option. We develop a model where regret-averse agents must decide between the status quo and a new risky option that outperforms the status quo in expectation, and learn the outcome of the risky option, if unchosen, with a probability that depends on the choices of others. This turns what was previously a series of single-person decision problems into a coordination game. Most notably, regret can facilitate coordination on the status quo - an action that would not be observed if the agents were acting in isolation or had standard preferences. We experimentally test the model and nd that regret-averse agents behave as predicted by our theory.