Regret minimization, willingness-to-accept-losses and framing

Decision-making and risk assessment are multi-criteria processes that typically require some processing of information, and thus cannot be defined accurately by rigid quantitative models. This article builds on prior work done in [M. Nwogugu, Towards multifactor models of decision making and risk: A critique of prospect theory and related approaches, part I, Journal of Risk Finance, 6 (2) (2005a) 150–162, M. Nwogugu, Towards multifactor models of decision making and risk: A critique of prospect theory and related approaches, part II, Journal of Risk Finance, 6 (2) (2005b) 163–172]. The article introduces willingness-to-accept-losses (WTAL), a new concept in decision making, and also re-defines and re-formulates “regret minimization”. The author develops the quantitative models for framing, regret minimization and WTAL, all of which can explain key aspects of decision making under uncertainty or risk. Regret minimization and WTAL can be applied in many situations such as portfolio management, negotiations, drug prescription, legal decision-making, automated manufacturing, dynamical systems, etc. However, the models will have to be tested.