Regret vs.
Disappointment theory
Pavlo R. Blavatskyy
Disappointment theory
• Initial idea: Bell (1985), Loomes
and Sugden (1986)
• Established model: Gul (1991)
• Prospect based model
• “Disappointment is a
psychological reaction to a
choice outcome that does not
meet one’s expectation”
Disappointment theory
continued
• Bell: one’s psychological
expectation = EV
• Individual is disappointed when
an outcome worse than EV
occurs
Disappointment theory
example
• L1 9 with certainty
• L2 (0, 0.9 ;100, 0.1)
• Value of L2 is likely to be lower
than value of L1
• … because L2 allows for
possibility to receive 0 < EV (L2)
Regret theory
• Initial idea: Bell (1982, 83), Loomes
and Sugden (1982)
• Established model: Loomes and
Sugden (1987)
• Comparison between a chosen
prospect and a foregone prospect
• Special case of Fishburn (1988)
BSS theory
Regret theory
continued
• Regret is a psychological
reaction to a choice of a
prospect whose performance is
worse than the performance of
a foregone prospect
Regret theory
formula
• States of the world s1, … , sn
L1  x1 ,..., xn   L2  y1 ,..., yn  
n
  psi hmax 0, yi  xi   0
i 1
Regret theory example
State
State
State
US wins
a draw
CZ wins
5
2
0
s1
Lottery L1
0
s2
2
s3
5
”Czech performance”
Lottery L2
“US performance”
• State s1 (s3) causes regret when L1
(L2) is chosen