value of information in competitive economies with incomplete markets we study the value of public information in competitive economies with incomplete markets we show that generically the welfare effect of a change in the information available prior to trading can be in any direction there exist changes in information that make all agents better off and changes for which all agents are worse off in contrast for any change in information a pareto improvement is feasible that is attainable by a planner facing the same informational and asset market constraints as agents in this sense the response of competitive markets to changes in information is typically not socially optimal

what are asset demand tests of expected utility really testing assuming the classic contingent claim setting a number of financial asset demand tests of expected utility have been developed and implemented in experimental settings however the domain of preferences of these asset demand tests differ from the mixture space of distributions assumed in the traditional binary lottery laboratory tests of von neumann morgenstern expected utility preferences we derive new sets axioms that are necessary and sufficient for preferences over contingent claims to be representable by an expected utility function we also indicate the additional axioms required to extend the representation to the more general case of preferences over risky prospects

one switch utility functions and a measure of risk consider the relative attractiveness to a decision maker of two financial gambles as the wealth of that individual varies it may seem reasonable that either one alternative should be preferred for all wealth levels or that there exists a unique critical wealth level at which the decision maker switches from preferring one alternative to the other decreasing risk aversion is not sufficient for this property to hold we identify the small class of utility functions for which it does we show how the property leads naturally to a measure of risk the results of this paper apply equally well to discounting functions for cash flows one switch discount functions permit at most one change in preference between cash flows as all payoffs are deferred in time

answering the skeptics yes standard volatility models do provide accurate forecasts a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using arch and stochastic volatility models while most of these studies have documented highly significant in sample parameter estimates and pronounced intertemporal volatility persistence traditional ex post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts contrary to this contention we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications new methods for improved ex post interdaily volatility measurements based on high frequency intradaily data are also discussed

growth forecasts belief manipulation and capital markets abstract we analyze how a benevolent privately informed government agency would optimally release information about the economy s growth rate when the agents hold heterogeneous beliefs we model two types of agent conforming and dissenting the former has a prior that is identical to that of the government agency whereas the latter has a prior that differs from that of the government agency we identify both informative and uninformative equilibria informative equilibria are equilibria in which the government agency s equilibrium signal leads to a revision of beliefs we demonstrate that the uninformative equilibria can in fact dominate the informative ones in terms of ex post social welfare

the consistency of welfare judgments with a representative consumer abstract it is common practice to use the representative consumer hypothesis without specifically assuming any of the sufficient conditions under which one will exist we show first that it is possible for the utility of the representative consumer to increase when every actual consumer is made worse off second in economies where this does not occur there exists a social welfare function which we construct which is consistent with welfare judgments based on the utility of the representative consumer finally we provide a converse to samuelson s 1956 representative consumer result

facilitating consumer learning in insurance markets what are the welfare effects we model a monopoly insurance market where consumers can learn their accident risks at a cost c we then ask what are the welfare effects of a policy that reduces c if c is sufficiently small c c marginally reducing c hurts the insurer and weakly benefits the consumer finally a reduction in c that is successful meaning that the consumer gathers information after the reduction but not before it can hurt both parties this article is protected by copyright all rights reserved

the value of public information in a cournot duopoly we derive alternative sufficient conditions for the value of public information to be either positive or negative in a cournot duopoly where firms technology exhibits constant returns to scale

information and the market for lemons this paper revisits akerlofs 1970 classic adverse selection market and asks the following question do greater information asymmetries reduce the gains from trade perhaps surprisingly the answer is no better information on the selling side worsens the buyers curse thus lowering demand but may shift supply as well whether trade increases or decreases depends on the relative sizes of these effects a characteization is given on the other hand improving the buyers information i e making private information public unambiguously improves trade so long as market demand is downward sloping

higher education funding the value of information abstract this note examines the key role of information about individual skills in economic welfare in the model agents invest in higher education when the returns to their investment are uncertain they choose how to finance their investment on the basis of a public signal about their individual skills this note provides an example of an economic framework in which in equilibrium more information about individual skills more accurate signals makes economic agents worse off

an evaluation of volatility forecasting techniques the existing literature contains conflicting evidence regarding the relative quality of stock market volatility forecasts evidence can be found supporting the superiority of relatively complex models including arch class models while there is also evidence supporting the superiority of more simple alternatives these inconsistencies are of particular concern because of the use of and reliance on volatility forecasts in key economic decision making and analysis and in asset option pricing this paper employs daily australian data to examine this issue the results suggest that the arch class of models and a simple regression model provide superior forecasts of volatility however the various model rankings are shown to be sensitive to the error statistic used to assess the accuracy of the forecasts nevertheless a clear message is that volatility forecasting is a notoriously difficult task

strategic information manipulation in duopolies abstract this paper studies a duopoly market in which firms can draw inferences concerning uncertain market demand from observations of their outputs and market price firms may adjust their outputs away from myopically optimal levels to affect the informativeness of the market price because firms quantities are observed firms can manipulate the extent to which belief revision occurs rather than the direction in which beliefs are revised as in signal jamming models we develop conditions and present examples under which the value of information is positive and negative and under which firms will increase or decrease quantity to manipulate information journal of economic literature classification numbers d80 l13

modeling international investment decisions for financial holding companies abstract this research analyzes the internationalization process model developed by johanson and vahlne and derives two integer programming investment decision models that consider the risk attitudes of investment firms johanson and vahlne s model provides a starting point for building a model that suits the investment approach and decision making process of financial holding companies in practice when firms make an international investment decision there is a need for a model that can generate outputs based on financial measures such as profit investment returns and tolerable levels of risk thus in this paper johanson and vahlne s concepts are studied and financial managers are interviewed to derive models that match the investment decision procedures of the firms the model helps firms manage the risks of their investments and derive accurate investment strategies based on investment objectives and constraints

surplus maximization and optimality i identify assumptions under which policies that maximize expected surplus are pareto optimal even when expected consumer surplus does not even locally represent preferences over price income lotteries besides the oft made partial equilibrium assumptions that only one price varies and that income changes do not aect demand the two other assumptions are that every consumer s indirect utility function is supermodular in price and income and policies order prices by a single crossing property supermodularity holds precisely if relative risk aversion exceeds the income elasticity of demand a mild condition the single crossing property appears strong but holds in many applications that use expected surplus

growth under uncertainty with experimentation abstract we introduce bayesian learning into a stochastic growth model and study the effect of experimentation on the optimal level of the investment decision and on the amount of information gathering when more investment produces more information experimentation can push towards a lower level of investment thus reducing information acquisition symmetrically when more investment reduces information experimentation can increase investment and again decrease information gathering these results run contrary to intuitions generated by the standard literature on experimentation

a word of caution on calculating market based minimum capital risk requirements this paper demonstrates that the use of garch type models for the calculation of minimum capital risk requirements mcrrs may lead to the production of inaccurate and therefore inefficient capital requirements we show that this inaccuracy stems from the fact that garch models typically overstate the degree of persistence in return volatility a simple modification to the model is found to improve the accuracy of mcrr estimates in both back and out of sample tests given that internal risk management models are currently in widespread usage in some parts of the world most notably the usa and will soon be permitted for ec banks and investment firms we believe that our paper should serve as a valuable caution to risk management practitioners who are using or intend to use this popular class of models

volatility forecasting without data snooping abstract data snooping arises when the properties of a data series influence the researcher s choice of model specification when data has been snooped tests undertaken using the same series are likely to be misleading this study seeks to predict equity market volatility using daily data on u k stock market returns over the period 1955 1989 we find that even apparently innocuous forms of data snooping significantly enhance reported forecast quality and that relatively sophisticated forecasting methods operated without data snooping often perform worse than naive benchmarks for predicting stock market volatility we therefore recommend two alternative models both of which are extremely simple

the value of information in efficient risk sharing arrangements suppose that agents share risks in competitive markets we show that better information makes everyone worse off if the economy has a representative agent that is the economy s demand for state contingent consumption equals the demand of a hypothetical agent who owns all the economy s wealth the representative agent moreover is normatively unrepresentative although each agent dislikes information the representative agent is indifferent although we emphasize pure exchange our results imply that a representative agent model might seriously misstate the welfare effects of improved information in an economy with production and risk sharing even if it performs well otherwise

the timing of information in a general equilibrium framework abstract traditional multiperiod models of asset markets assume that traders take the information filtration as given this paper explores the effect of endogenizing the arrival of information on the dynamic completeness of markets it is shown that if an agent is allowed to release information at a sufficiently small cost which prevents traders from dynamically completing the market she might choose to do so furthermore we show that in economies with enough heterogeneity it is always possible to find an agent who would choose to release information thus with endogenous timing of information markets are unlikely to be dynamically complete journal of economic literature classification numbers d52 d82 g14

a contextual uncertainty condition for behavior under risk suppose that your choice between uncertain financial prospects is made more difficult by two independent contextual uncertainties concerning the size of your existing wealth one contextual uncertainty has a greater spread than the other if you could resolve one of these contextual uncertainties before making your choice would you rather it be the larger or the smaller in this paper we explore the intuitive notion that it ought to be more advantageous to resolve larger rather than smaller contextual uncertainties the utility function for wealth uw aw be cwa b c 0 is the only utility function that satisfies this condition and that is also increasing and risk averse at all wealth levels

a standard measure of risk and risk value models in this paper we propose a standard measure of risk that is based on the converted expected utility of normalized lotteries with zero expected values this measure of risk has many desirable properties that characterize the notion of risk it is very general and includes many previously proposed measures of risk as special cases moreover our standard measure of risk provides a preference based and unified method for risk studies since the standard measure of risk is compatible with the measure of expected utility it can be used explicitly or implicitly in an expected utility model under a condition called risk independence a decision could be made by explicitly trading off between risk and value which offers an alternative representation of the expected utility model named the standard risk value model finally we discuss some other applications of the standard measure of risk and extensions of our risk value tradeoff framework for descriptive decision making

bayesian economist bayesian agents i an alternative approach to optimal learning we generalize the results on bayesian learning based on the martingale convergence theorem to the sequential framework we show that the variability in the sequential framework is sufficient under mild conditions to circumvent the incomplete learning results that characterize the optimal learning literature we then give an alternative approach whereby the economist is bayesian with a prior on the space of agent priors we illustrate the usefulness of our approach by applying it to two popular economic examples a monopolist who does not know the demand curve he faces and the stochastic single sector growth model with an unknown production function

does vix or volume improve garch volatility forecasts abstractthis article considers whether the inclusion of two additional variables can improve volatility forecasts over a standard garch based model we consider three alternative ways of incorporating the volatility index vix and trading volume as exogenous variables within a selection of garch models we are particularly interested in whether these variables have additional incremental forecast power over and above the baseline garch specification our results suggest that both the vix and volume do provide some additional forecast power and this is generally improved when considering both of these series jointly in the model however while the results may be statistically significant the gain is marginal and the coefficient values small moreover in a horse race exercise vix does not outperform the garch approach in answering the question of whether vix produces better forecasts than the garch model then the answer is no but the informational content of vix cannot be ignored and should be incorp

experimentation and learning in a differentiated products duopoly abstract this paper explores price setting behavior in the context of a duopoly in which firms are uncertain about the degree of product differentiation firms learn from the difference in their realized demands in light of the price differential the informativeness of this market experiment is shown to be increasing in size of the price differential in markets with highly substitutable products price dispersion is enhanced as firms adjust their prices so as to generate more information in markets with highly differentiated products firms compress their prices as they prefer to reveal less about the extent of product differentiation journal of economic literature classification numbers d43 d83 l13

capital requirements for securities firms regulatory authorities set capital requirements to cover the position risk of securities firms and to protect against losses arising from fluctuations in the value of their holdings the requirements may be set using the comprehensive approach required by the u s securities and exchange commission the building block approach required by the european community or the portfolio approach required by the united kingdom we compare these three alternatives using a large sample of u k equity trading books the portfolio approach systematically specifies larger requirements for riskier books and vice versa it is more efficient than the building block approach and far more efficient than the comprehensive approach

endogenous public information and welfare in market games this paper performs a welfare analysis of markets with private information in which agents can condition on noisy prices in the rational expectations tradition pricecontingent strategies introduce two externalities in the use of private information a payoff pecuniary externality related to aggregate volatility and a learning externality the impact of the first depends on whether competition is of the strategic substitutes or complements variety and the second induces agents to put too little weight on private information we find that with strategic substitutes and when the learning externality is not very strong agents put too much weight on private information and prices are too informative this will happen in the normal case where the allocational role of price prevails over its informational role under strategic complementarity there is always under reliance on private information the welfare loss at the market solution may be increasing in the precision of private information the analysis provides insights into optimal business cycle policy and a rationale for a tobin like tax for speculators in financial markets

the motivating uncertainty effect uncertainty increases resource investment in the process of reward pursuit can a reward of an uncertain magnitude be more motivating than a reward of a certain magnitude this research documents the motivating uncertainty effect and specifies when this effect occurs people invest more effort time and money to qualify for an uncertain reward e g a 50 chance at 2 and a 50 chance at 1 than a certain reward of a higher expected value e g a 100 chance at 2 this effect arises only when people focus on the process of pursuing a reward not when they focus on the outcome the reward itself when the focus is on the process of reward pursuit uncertainty generates positive experience such as excitement and hence increases motivation four studies involving real rewards lend support to the motivating uncertainty effect this research carries theoretical implications for research on risk preference and motivation and practical implications for how to devise cost efficient consumer incentive systems

policy announcements and welfare in the presence of idiosyncratic risk the public revelation of information about uncertain aggregate outcomes such as policy choices can be detrimental to social welfare by announcing informative signals on non insurable aggregate risk the policy maker distorts agents insurance incentives and increases the riskiness of the optimal allocation that is feasible in self enforceable arrangements as an application we consider a monetary authority that may reveal changes in the inflation target and document that the negative effect of distorted insurance incentives can very well dominate conventional effects in favor for the release of better information

costly buyer search in a differentiated products model an experimental study this study examines whether the content of buyer information and the timing of its dissemination affects seller market power we construct laboratory markets with differentiated goods and costly buyer search in which sellers simultaneously post prices the experiment varies the information on price or product characteristics that buyers learn under different timing assumptions pre and postsearch generating four information treatments theory predicts that price information lowers the equilibrium price but information about product characteristics increases the equilibrium price that is contrary to intuition the presence of informed buyers may impart a negative externality on other uninformed buyers data support the model s negative externality result when sellers face a large number of robot buyers that are programmed to search optimally observed prices conform to the model s comparative statics and are broadly consistent with predicted levels with human buyers however excessive search instigates increased price competition and sellers post prices that are significantly lower than predicted

sufficient and necessary conditions for information to have social value in pure exchange this paper extends corrects and unifies earlier statements concerning the social value of public information as well as the no trading conditions in pure exchange sufficient and necessary conditions are provided for both the single period and two period cases in a postsignal trading model the social value of information is shown to be closely linked to the allocational efficiency of the market the degree of homogeneity of prior beliefs and of information structures the time additivity of preferences and the efficiency of endowments we conclude that the case in favor of public information is much stronger than previously suggested

the persistence of volatility and stock market fluctuations this paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices it demonstrates that volatility is only weakly serially correlated implying that shocks to volatility do not persist these shocks can therefore have only a small impact on stockmarket prices since changes in volatility affect expected required rates of return for relatively short intervals these findings lead us to be skeptical of recent claims that the stock market s poor performance during the 1970 s can be explained by volatility induced increases in risk premia this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

the social value of hidden information in adverse selection economies abstract when agents possess imperfect hidden knowledge at the time contracts are negotiated the social value of agents having access to additional hidden knowledge before contracts are implemented is positive to the extent that incentive constrained agents are sorted more finely but is negative to the extent that incentive constraining agents impose more stringent signalling requirements on others hence the intuition developed by hirshleifer 1971 marshall 1974 and milgrom and stokey 1982 that privately acquired information has neither positive nor negative social value when agents possess no prior hidden knowledge does not apply when agents possess imperfect hidden knowledge during contractual negotiations

a method for strategic asset liability management with an application to the federal home loan bank of new york strategic asset liability management is a primary concern in today s banking environment in this paper we present a methodology to assist in the process of asset liability selection in a stochastic interest rate environment in our approach a quadratic optimizer is embedded in a simulation model and used to generate patterns of dividends market value and duration of capital for randomly generated interest rate scenarios this approach can be used to formulate test and refine asset liability strategies we present results of applying this methodology to data from the federal home loan bank of new york

adverse selection with endogenous information in insurance markets abstract models of adverse selection assume that risk type is known to the consumer but not to the insurer many analyses suggest that information has zero social value and negative prior value why then would consumers become informed what is the incentive to gather information and why does adverse selection arise we show that the private value of information is non negative only if insurers cannot observe consumers information status or if consumers can conceal their informational status we examine the existence and characterization of equilibria under different configurations of information costs and benefits finally we examine some welfare implications of the endogenous information model for public policy regarding genetic testing and for state regulations concerning hiv testing

blackwell s ordering and public information abstract we characterize a precise comparative static on welfare and the amount of public information in an economy under uncertainty results dating to hirshleifer amer econom rev 61 1971 561 have suggested that information can have negative value in such a setting but counterexamples using competitive equilibrium outcomes have suppressed general results to this effect we show that under the solution concept of implementable allocations the negative relationship between more public information in the sense of blackwell and welfare is fully general furthermore blackwell s ranking is necessary as well as sufficient to obtain our ranking and hence ours provides an equivalent characterization of his ordering

mean lower partial moment valuation and lognormally distributed returns in this paper we develop a capital asset pricing model in a mean lower partial moment framework specifically we show that when partial moments are computed about the expected risky portfolio return optimal portfolio choice in a mean lower partial framework permits a two fund portfolio separation between a riskless asset and a market portfolio of risky assets in this new framework risk is measured as semideviation for second degree stochastic dominance and semivariance for third degree stochastic dominance further when security returns are lognormally distributed and small risk this new mean lower partial moment valuation specializes to the mean logarithmic variance capital asset pricing model

forecasting volatility and volume in the tokyo stock market long memory fractality and regime switching abstract we investigate the predictability of both volatility and volume for a large sample of japanese stocks the particular emphasis of this paper is on assessing the performance of long memory time series models in comparison to their short memory counterparts since long memory models should have a particular advantage over long forecasting horizons we consider predictions of up to 100 days ahead in most respects the long memory models arfima figarch and the recently introduced multifractal model dominate over garch and arma models however while figarch and arfima also have quite a number of cases with dramatic failures of their forecasts the multifractal model does not suffer from this shortcoming and its performance practically always improves upon the naive forecast provided by historical volatility as a somewhat surprising result we also find that for figarch and arfima models pooled estimates i e averages of parameter estimates from a sample of time series give much better results than individually estimated models

standard deviations implied in option prices as predictors of future stock price variability abstract standard deviations implied in option prices have recently been introduced as being better than average predictors of future stock price variability this article specifically studies the predictive ability of implicit standard deviations taking into account the dividend problem and the problem of optimal weighting schemes of the standard deviations when there are several options on the same stock transaction data information was used to study the importance of non simultaneities in observing stock and option prices

contingent portfolio programming for the management of risky projects methods for selecting a research and development r d project portfolio have attracted considerable interest among practitioners and academics this notwithstanding the industrial uptake of these methods has remained limited partly because of the difficulties of capturing relevant concerns in r d portfolio management motivated by these difficulties we develop contingent portfolio programming cpp which extends earlier approaches in that it i uses states of nature to capture exogenous uncertainties ii models resources through dynamic state variables and iii provides guidance for the selection of an optimal project portfolio that is compatible with the decision maker s risk attitude although cpp is presented here in the context of r d project portfolios it is applicable to a variety of investment problems where the dynamics and interactions of investment opportunities must be accounted for

improvement in information and private investment in education this paper uses the framework of an olg economy for an analysis of the dynamic interaction between the precision of information about individual skills investment in education human capital accumulation and social welfare the human capital of an individual depends on both his subjectively random ability and his investment in education individual investment in education is financed through a loan contract with income contingent terms of repayment investment decisions are based on public signals test outcomes which screen all agents for their abilities we find that better information which allows more efficient screening enhances aggregate human capital formation but may at the same time stifle aggregate investment in education moreover social welfare may increase or decline depending on the transformation technology and on the relative measure of risk aversion c 2009 elsevier b v all rights reserved

information and the equity premium we determine how better information aects the average equity premium in a standard representative agent exchange economy perfect information obviously eliminates the equity premium and we show that a particular kind of information about the level of future consumption always lowers the average equity premium surprisingly information must sometimes raise the average equity premium no matter what the preferences of the representative agent information purely about the volatility either of consumption or the marginal utility of consumption raises the equity premium for a wide class of preferences moreover information can raise the average equity premium by an arbitrarily large percentage while still matching important magnitudes such as average growth and the risk free rate we consider two dierent economies a two period economy with arbitrary preferences for the representative agent and an infinite horizon economy with standard additive separable ces utility with independent growth rates through time

a generalized utility model of disappointment and regret effects on post choice valuation in this paper we show that performance information about forgone alternatives i e alternative that were considered but not chosen can have a significant impact on post choice valuation our approach introduces a new and parsimonious way of looking at satisfaction that combines the literature on post choice valuation with research regarding generalized expected utility theory while the post valuation literature focuses on the selected brand as the valuation s basis e g anderson and sullivan anderson e w m w sullivan 1993 the antecedents and consequences of customer satisfaction for firms marketing sci 12spring 125 143 bolton and drew bolton r j drew 1991 a multistage model of customers assessments of service quality and value j consumer res 17 375 384 we draw on a stream of research in generalized expected utility theory that considers both chosen and forgone alternatives as the basis for valuation e g bell bell d 1983 risk premiums for decision regret management sci 29 1156 1166 and bell d 1985 disappointment in decision making under uncertainty oper res 33 1 27 loomes and sugden loomes g r sugden 1982 regret theory an alternative theory of rational choice under uncertainty the econom j 92 805 824 and loomes g r sugden 1986 disappointment and dynamic consistency in choice under uncertainty rev econom stud 53 271 282 the result is a combined model of post choice valuation that explicitly incorporates both concepts specifically we extend the existing paradigm of post choice valuation to include buyers regret concerning forgone alternatives proposing a generalized utility theory based treatment of post choice product assessment that uses the intuitively appealing concepts of disappointment and regret as the basis we propose a model for conceptualizing post choice valuation that is consistent with the existing literature discuss how this model extends the construct to consider the influence of forgone alternatives and report results of an empirical test that contrasts our model to important recent work in the area e g boulding et al boulding w a kalra r staelin v a zeithaml 1993 a dynamic process model of service quality from expectations to behavioral intentions j marketing res 30february 7 27 our generalized model of post choice valuation is based on the sum of three components that represent factors that may contribute to consumers assessment of a chosen product or service the first component is expected performance the second component is disappointment which captures the discrepancy between actual and expected performance much as the disconfirmation construct in traditional satisfaction research the third component is regret which captures the difference between the performance of the chosen product service and the performance of a forgone product service this perspective is useful in that risk is captured by the disappointment and regret terms providing an intuitively appealing decomposition of post choice valuation and offering several advances over previous representations of disappointment and regret we test our model via a choice experiment participants in the empirical study were asked to make choices between successive lottery pairs they were then given outcome feedback on the forgone alternative as well as on the chosen alternative in each lottery pair immediately following outcome feedback for each choice subjects were asked to evaluate their decision our results clearly suggest an effect of regret on post choice valuation information about the forgone alternative influenced subjects valuation of the chosen alternative we also find evidence that as predicted the effects of disappointment and regret on post choice valuation are asymmetric specifically the negative effect of disappointment on post choice valuation was greater than the positive effect of elation similarly the negative effect of regret was greater than the positive impact of rejoicing our research offers five contributions to the literature on post choice valuation first our results illustrate the advantage of using generalized utility theory as the basis for conceptualizing and modeling post choice valuation we derive a model of post choice valuation that formally captures the components of disappointment and regret and show that the outcome of both the chosen alternative through disappointment and a forgone alternative through regret can influence the chosen alternative s valuation second we formally integrate the concepts of disappointment and regret which have been examined separately for many years into a single model based on a multiattribute preference structure third we argue that the effects of disappointment and regret on post choice valuation are asymmetric and present empirical evidence in this regard fourth our results suggest that word of mouth regarding forgone alternatives may affect post choice valuation extending research that has not heretofore considered forgone outcomes role in this process finally our development provides a preconsumption measure of potential disappointment and regret in modeling choice at the time of choice consumers may visualize the feelings of disappointment and or regret that will be derived at consumption taking into account both the chosen brand and forgone brands our generalized utility theory based approach to the post choice valuation construct can be useful in examining the role of disappointment and regret as preconsumption constructs