Regret theory: A new foundation

Abstract

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 a recently introduced empirical and quantitative measurement method. Our behavioral foundation allows deriving a continuous regret theory representation and separating utility from regret. The axioms in our behavioral foundation clarify that regret theory minimally deviates from expected utility by relaxing transitivity only.