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When choosing is painful: anticipated regret and psychological opportunity cost

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  • Emmanuelle GABILLON

Abstract

This paper is a contribution to regret theory, which we generalize in two ways. Since the intensity of regret depends on the information the decision-maker has about the results of the foregone strategies (feedback), we build a model of choice which accommodates any feedback structure. We also show that the reference point, which characterizes the regret utility function introduced by Quiggin (1994), does not always represent an anticipated feeling of regret. It can also correspond to another negative feeling related to the act of choosing, which we call psychological opportunity cost (POC), borne at the very moment of choosing. We find behavioral deviations from the predictions of the classical Expected Utility Theory. We obtain correlation loving, greater reluctance to take on risk, and information avoidance at decision time. Our model also offers a theoretical framework for experimental studies about inaction inertia.

Suggested Citation

  • Emmanuelle GABILLON, 2020. "When choosing is painful: anticipated regret and psychological opportunity cost," Bordeaux Economics Working Papers 2020-04, Bordeaux School of Economics (BSE).
    • Handle: RePEc:grt:bdxewp:2020-04
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    File URL: http://bordeauxeconomicswp.u-bordeaux.fr/2020/2020-04.pdf
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    References listed on IDEAS

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    Cited by:

    1. Emmanuelle Gabillon, 2022. "Regret aversion and information aversion," Working Papers hal-03898012, HAL.
    2. Emmanuelle GABILLON, 2022. "Regret aversion and information aversion," Bordeaux Economics Working Papers 2022-12, Bordeaux School of Economics (BSE).
    3. Yushi Wang & Licheng Sun & Shilong Li, 2022. "Production Decisions of Automakers Considering the Impact of Anticipated Regret under the Dual-Credit Policy," Sustainability, MDPI, vol. 14(11), pages 1-18, May.

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    More about this item

    Keywords

    Choice; Correlation loving; Inaction inertia; Information; Regret; Risk aversion;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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