Wildcard Options: The Option of Maximum Regret
Behavioral economists continue to present a plethora of situations where investors and economic participants make choices that appear irrational at first but can be explained by psychological and emotional reactions. One such situation is where decision-makers choose to minimize their level of future regret – the feeling that they have made a bad decision after that decision has been made and wistful thinking about what could have been – rather than a more traditional economic goal such as maximizing profits or utility.
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