ORTIZATIONAL THEORY & DESIGN

PROJECT DELIVERABLE 2
by
Raies
MMS193011

The Impact of Self-Control Bias on Consumer Financial Behavior with

Mediating Effect of Regret Aversion Bias & Moderating Effect of
Income
MODEL

Regret Aversion
Bias

Consumer
Self Control
Financial
Bias Behavior

Income

The model show that the self-control and regret aversion bias has an impact on consumer financial
behavior with the moderating effect of income because when income increases the buying behavior of the
consumer will change low to high consumer buy more. income has a direct impact on the consumer
behavior. Self -control means the controlling of yourself from any kind of outcomes that arises from any
kind of decision related to business or personal life. Self-control essential means discipline. Consumer
behavior is a vital determinant of a business success. When the economy is performing well, consumer
sentiment is strong, and people spend money. But when the economy falters, confidence falls and people
cut back on their spending, even if they are not directly threatened. The human emotion is a very
important variable at the time of making any sort of decision. Mainly, it is the ability to manage one's
affections, attitude, and ambitions so as to attain some reward, or keep away from some penalty. It is
generally the process of taking an action to rebuffing yourself. It is generally the superiority that permits
you in order to discontinue yourself by performing the actions that you would like to execute but such
might be unsuitable for you. Self-control is basically the conflict that exists among the desires of the
people and the achievement of those desires. So we have to discuss the impact of self-control bias on
consumer behavior. Cowen (1991) states that people can’t achieve their goals in a right way as they want
until they manage all of their areas; education, sports, family, job and any other in a well-planned manner.
If the income is raising the buying power is increases and if its fall than people spend less, income
playing a moderating role between a self-control bias and consumer financial behavior because when
consumer spend his money, they have to keep in mind their income’s. Controlling behaviors can be a
form of controlling emotions and or cognitions.

Regret theory states that people anticipate regret if they make a wrong choice and they take this
anticipation into consideration when making decisions. Regret is basically a disappointment that arises in
consumer mind when he takes any type of wrong decision. And this disappointment create temptation.
Regret-averse people may fear the consequences of both errors of omission (e.g. not buying the right
investment property) and commission (e.g. buying the wrong investment property). regret aversion causes
investors to anticipate and fear the pain of regret that comes with incurring a loss or forfeiting a profit.
Regret aversion leads investors to prefer stocks of subjectively designated good companies, even when an
alternative stock has an equal or a higher expected return. The feeling of regret felt after a certain decision
has various consequences on consumer's behavior. Regret (and disappointment) has a direct impact on
consumer's behavior, such as the behavior of complaint, of change and word of mouth communication.
Individuals have preferences over sets of alternatives that represent second period choices. One study
identifies the individual’s commitment ranking, temptation ranking, and cost of self-control. An
Individual has a preference for commitment if he strictly prefers a subset of alternatives to the set itself.
An Individual has self-control if he resists temptation and chooses an option with higher ex ante utility. It
introduced comparative measures of preference for commitment and self-control and relate them to
representations.