Agents form expectations about the future in many markets, and these expectations drive investment and consumption behavior, inform entry and exit choices, and can even provide direct satisfaction or distress. How agents form expectations is therefore of central interest to economists. This...

In this paper, we present and test the empirical implications of competing theories about how expectations of outcomes affect utility. In the first utility formulation, which is consistent with particular interpretations of disappointment, prospect theory and regret theory, individuals receive...