Are Preferences Monotonic? Testing Some Predictions of Regret Theory

In this paper, the authors demonstrate that the assumption of "regret aversion," which has been invoked in regret theory to explain several well-documented violations of expected utility theory, also implies the existence of strict preferences between some stochastically equivalent actions and implies certain systematic violations of monotonicity. The authors report an experimental test of these predictions. They find that, while choices between stochastically equivalent actions are entirely consistent with expected utility theory, there is clear evidence of the monotonicity violations predicted by regret theory. Copyright 1992 by The London School of Economics and Political Science.

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