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  Ignorance is bliss: a game of regret

Cerrone, C., Feri, F., & Neary, P. R. (2019). Ignorance is bliss: a game of regret.

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Item Permalink: http://hdl.handle.net/21.11116/0000-0003-FE13-A Version Permalink: http://hdl.handle.net/21.11116/0000-0005-0F14-5
Genre: Paper

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 Creators:
Cerrone, Claudia1, Author              
Feri, Francesco, Author
Neary, Philip R., Author
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: regret aversion, coordination games, information
 JEL: C72 - Noncooperative Games
 JEL: C92 - Laboratory, Group Behavior
 JEL: D81 - Criteria for Decision-Making under Risk and Uncertainty
 JEL: D91 - Intertemporal Household Choice; Life Cycle Models and Saving
 Abstract: 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 find that regret-averse agents behave as predicted by our theory.

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 Dates: 2019-07-09
 Publication Status: Published online
 Pages: -
 Publishing info: Bonn : Max Planck Institute for Research on Collective Goods, Discussion Paper 2019/10
 Table of Contents: -
 Rev. Type: -
 Identifiers: Other: 2019/19
 Degree: -

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