We present a new behavioral foundation for regret theory. The central axiom of this foundation — trade-off consistency — renders regret theory observable at the individual level and makes our foundation consistent with the existing measurement method. For the first time, our behavioral foundation allows deriving a continuous regret theory representation and separating utility from regret.
Finally, the axioms in the behavioral foundation clarify that regret theory minimally deviates from expected utility by relaxing transitivity only.
Awards: Finalist, 2014, INFORMS Decision Analysis Society Student Paper Award
[2] Regret Theory and Risk Attitudes
We examine risk attitudes under regret theory and derive analytical expressions for two components - the resolution and regret premiums - of the risk premium under regret theory. We posit that regret-averse decision makers are risk seeking (resp., risk averse) for low (resp., high) probabilities of gains and that feedback concerning the forgone option reinforces risk attitudes. We test these hypotheses experimentally and estimate empirically both the resolution premium and the regret premium. Our results confirm the predominance of regret aversion but not the risk attitudes predicted by regret theory; they also clarify how feedback affects attitudes toward both risk and regret.
[3] Risk and time preferences interaction: An experimental measurement
We experimentally characterize and measure the interaction between risk and time preferences. Our results indicate that risk and time preferences are intertwined.
We find that decision makers are insensitive to time delay for small probabilities of gains, but become progressively more sensitive to time delay as the probability of
gain increases. We compare the fit of existing decision models that capture risk and time preferences. Our results indicate that the models which allow for probabilitytime interaction and capture magnitude effect fit the data better. We also show that
accounting for risk-time preferences interaction leads to lower estimated discount rates.
[4] Raising the Temperature in the Tropics: Gradual Targets Promote Energy Conservation Habits
In tropical countries, ACs account for a significant fraction of energy consumption. Increasing the AC temperature can lead to substantial reduction in energy use. We conduct a randomized control trial (RCT) in which people are financially rewarded for setting a higher AC temperature than usual and investigate whether people can adapt to the higher temperature.
Along with a no-incentive control condition, two treatments were conducted over two time periods. In treatment 1, subjects were incentivized to raise the temperature gradually, by 1°C in period 1, and an additional 1°C in period 2. In treatment 2, subjects were only incentivized to abruptly increase the temperature by 2°C in period 2.
The treatment with gradual temperature targets worked better in maintaining the higher AC temperature during the intervention and post-intervention periods. Energy usage data confirmed that these higher AC temperatures translated into lower energy consumption.
[5] Adoption of New technology Vaccines
[8] The Reassurance effect in information acquisition
To be effective, marketers of information need insights into the motivational bases of information acquisition. Conventionally, information acquisition is motivated by its instrumental value—the value derived from adapting action to new knowledge. In this paper, we analyse a model of individual preferences that anticipate elation and disappointment—the emotional responses to good and bad news. We assume loss aversion (bad news looms larger than good news) and diminishing sensitivity. While emotions are generally presumed to cause information avoidance, our key finding is that a consumer faced with a large potential loss of low probability may seek non-instrumental information for the purpose of reassurance. When information is weakly instrumental, the pursuit of reassurance can cause a consumer who is less likely to face a loss to value information more than a consumer who is more likely to face the same loss. This paradox disappears at higher levels of information instrumentality. We provide empirical support for this effect, first in the context of an incentivized controlled experiment involving a compound lottery choice (N = 403), and then in the context of a survey (N = 1349) about the desire to undertake COVID-19 testing, carried out at the early stages of the pandemic.
Awards: Best Paper Award in the theme “Marketing, Wellbeing, and Healthcare” at the 2018 American Marketing
Association Winter Academic Conference.
[9] Leveraging Rational addiction theory to reduce mobile usage
