Rational economic regret?
Fortunately for this investigation, approaching regret in a rational framework has been attemptedbefore. Not surprisingly, research is this area has been pioneered by economists who sought toextend their models to account for a greater degree of psychological realism. However, due to therestrictive nature of their assumptions, they needed to define regret in such a way that it did notviolate the principals of standard economic theory.One must ask how economists stumbled upon the notion of regret. After all the thorny issue of
‘feelings’ and ‘emotions’ is an area of investigation that economists have long abstained from
(McLaughlin, 2010, in press). Economists believed that they could resolve the conflict presented by
(1953) paradox, in which economic agents consistently make decisions that conflict withrational choice theory, by investigating the impact of regret on decision making.Regret theory, did just that: starting from a conception of human beings as rational economicagents, it developed a mathematical model of regret consistent with the traditional axioms of thefield. Bell (1982)
demonstrates how “some of the paradoxical behaviour of decision makers is
consistent with a desire to avoid post-
(p. 979). The notion that consumers takeanticipated regret into account when making decisions is certainly a novel result in economics. Evenmore fascinating is the work of Loomes and Sugden (1982) who demonstrated how a mathematicalmodel of regret could be developed from the same basic axioms proposed by von Neumann andMorgenstern (1947) and Savage (1954). At the core of this model are individuals who want tominimise regret subject to subject to a desire to maximise overall happiness.Fundamentally, regret is of such interest to economists and psychologists a like because it is anunpleasant cognitive state (or as an economist would put it, it reduces expected utility). As such, itwill have an adverse effect on the decision making process.
As Jane Eyre famously put it: “Remorse is
, 2008 , p. 125). Therefore, regret over the alternativeforegone will decrease the utility associated with a given decision.Indeed, research has shown that, contrary to classic economic theory, people often make riskseeking choices in order to minimise regret (Zeelenberg et al., 1996). This is consistent with theassertions of regret theory. However, such models are not without limitation.Regret is defined so narrowly that it makes it difficult to apply these findings to other areas of
research in psychology. For example, Bell (1982) defines regret as “the difference in value betweenassets received and the highest level of assets produced by other alternatives” (p. 380). Such a
definition implies that regret is based on a comparison of
’ with ‘
what might have been
takes no account for how the formation of regret can influence decision making.
The origins of regret: counterfactual thinking
We will now turn to psychological investigations into regret as it is research in this field has thatsought to explain the underlying mechanisms of regret and the implications for decision making.Research is this domain has aimed to build on the early work of economists and provide a morenuanced analysis of the role of regret in decision making. As Zeelenberg and van Dijk (2005) note
“counterfactual thinking has a profound influence
on emotional experiences. It can elicit and amplify