Regret Equilibrium and Risk Preferences

The paper proposes a framework to extend regret theory to dynamic contexts. The key idea is to conceive of a dynamic decision problem with regret as an intra-personal game in which the agent forms conjectures about the behaviour of the various counterfactual selves that he could have been. We derive behavioural implications in situations in which payoffs are correlated across either time or contingencies. In the first case, regret might give rise to excess conservatism or a tendency to make up for missed opportunities. In the second case, a notion of habitual behaviour emerges. We relate our results to empirical evidence