# R E S E A R C H

## Working Papers

Salience and regret theories describe how the manipulation of relative differences between potential outcomes of risky options affects individuals’ decisions. In this project, I present axiomatizations for both theories. The axioms for salience theory formulate hypotheses concerning preferences for a large difference in outcomes compared to the summation of smaller differences that partitions it. To test these axioms, we conduct an online experiment with 800 participants. The current experiment finds supportive evidence for both theories at the aggregate level. However, there’s notable heterogeneity in the results: The violation rates of our main hypotheses are between 39% to 72%.

Economic decisions frequently involve risks through multiple relevant aspects. While experiments demonstrate robust evidence for both context-dependent effects across riskless dimensions and deviations from the canonical model, Expected Utility, little is known for how these impacts work collectively. This manuscript proposes and characterizes an extension of salience theory (Bordalo et al., 2012, 2013) for the treatment of multidimensional lotteries. By implementing the elaborated model into intertermporal decisions, it rationalizes prominent Discounted Expected Utility deviations and delivers additional testable predictions. The model’s predictions are explored in three existing data sets and a novel experiment, which distinguishes multidimensional salience from competing theories. Roughly 80% of prior experimental deviations from Discounted Expected Utility are consistent with intertemporal salience, and new experimental data largely confirm the predictions of the theory.

## Research in Progress

A Unified Test for Cumulative Prospect Theory

As a leading non-expected utility model, Cumulative Prospect Theory (CPT) explains a wide range of deviations from expected utility theory while retaining most of its normatively appealing axioms. CPT encompasses three major components: a probability weighting function, a utility function, and rank dependence. In this project, I introduce an experiment designed to analyze these three factors using a unified question format. The experiment provides separate nonparametric estimates for subjects’ probability weighting functions and utility functions. It also conducts a test for rank dependence. Notably, the hypothesis of this test is independent of both the probability weighting function and the utility function.

Regret Theory: Corrections and Extensions with Enrico Diecidue, Jeeva Somasundaram, and Shuoli Liu

Diecidue and Somasundaram (2017) provide axioms for regret theory (Loomes and Sugden (1982)) under the subjective state space framework. In this project, we show that the major axiom in this previous work, *trade-off consistency*, is not sufficient for either the original regret theory or the generalized regret theory (Loomes and Sugden (1987)). We also provide a new set of axioms that characterize both versions of regret theories.