IDEAS home Printed from https://ideas.repec.org/a/kap/jrisku/v69y2024i3d10.1007_s11166-024-09447-1.html
   My bibliography  Save this article

Information avoidance: An experimental test of anticipated regret

Author

Listed:
  • Therese Cavlovic

    (Weber State University)

  • Brandon C. Koford

    (Weber State University)

  • Lucas Rentschler

    (Utah State University)

Abstract

One reason people may avoid potentially useful information is to eliminate anticipated regret. We develop a model of anticipated regret and use it to derive predictions about how the accuracy of information and the ability to mitigate negative states of the world affect the decision to be informed. The model predicts that higher information accuracy and more effective mitigation options reduce information avoidance. We test these predictions using a laboratory experiment with a real-effort task and uncertain payoffs. Subjects choose whether to receive free but imperfect information about the state of the world (the piece-rate for the effort task) before deciding on a costly mitigation investment, doing the real effort task, and then learning their final payoff. We vary both the accuracy of the information and the effectiveness of mitigation in a $$2\times 2$$ 2 × 2 between-subjects experimental design. We find that increasing the accuracy of information increases information acquisition. Increasing mitigation effectiveness only increases informedness slightly, and the results are not significant. Overall, our results are consistent with our model of anticipated regret, but decision-making is noisier than predicted.

Suggested Citation

  • Therese Cavlovic & Brandon C. Koford & Lucas Rentschler, 2024. "Information avoidance: An experimental test of anticipated regret," Journal of Risk and Uncertainty, Springer, vol. 69(3), pages 323-348, December.
  • Handle: RePEc:kap:jrisku:v:69:y:2024:i:3:d:10.1007_s11166-024-09447-1
    DOI: 10.1007/s11166-024-09447-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11166-024-09447-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s11166-024-09447-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Markus K. Brunnermeier & Jonathan A. Parker, 2005. "Optimal Expectations," American Economic Review, American Economic Association, vol. 95(4), pages 1092-1118, September.
    2. David E. Bell, 1983. "Risk Premiums for Decision Regret," Management Science, INFORMS, vol. 29(10), pages 1156-1166, October.
    3. Richard Engelbrecht-Wiggans & Elena Katok, 2008. "Regret and Feedback Information in First-Price Sealed-Bid Auctions," Management Science, INFORMS, vol. 54(4), pages 808-819, April.
    4. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    5. Charness, Gary & Gneezy, Uri & Henderson, Austin, 2018. "Experimental methods: Measuring effort in economics experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 74-87.
    6. Mattsson, Lars-Goran & Weibull, Jorgen W., 2002. "Probabilistic choice and procedurally bounded rationality," Games and Economic Behavior, Elsevier, vol. 41(1), pages 61-78, October.
    7. De Bondt, Werner F M & Thaler, Richard, 1985. "Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
    8. Michael Hoy & Richard Peter & Andreas Richter, 2014. "Take-up for genetic tests and ambiguity," Journal of Risk and Uncertainty, Springer, vol. 48(2), pages 111-133, April.
    9. Quiggin, John, 1994. "Regret Theory with General Choice Sets," Journal of Risk and Uncertainty, Springer, vol. 8(2), pages 153-165, March.
    10. Zeelenberg, M., 1999. "Anticipated regret, expected feedback and behavioral decision-making," Other publications TiSEM 38371d1b-31fd-45b0-860f-b, Tilburg University, School of Economics and Management.
    11. Emmanuelle GABILLON, 2020. "When choosing is painful: anticipated regret and psychological opportunity cost," Bordeaux Economics Working Papers 2020-04, Bordeaux School of Economics (BSE).
    12. Emel Filiz-Ozbay & Erkut Y. Ozbay, 2007. "Auctions with Anticipated Regret: Theory and Experiment," American Economic Review, American Economic Association, vol. 97(4), pages 1407-1418, September.
    13. Simonson, Itamar, 1992. "The Influence of Anticipating Regret and Responsibility on Purchase Decisions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(1), pages 105-118, June.
    14. Bartosz Maćkowiak & Filip Matějka & Mirko Wiederholt, 2023. "Rational Inattention: A Review," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 226-273, March.
    15. Linda Thunström & Jonas Nordström & Jason F. Shogren & Mariah Ehmke & Klaas Veld, 2016. "Strategic self-ignorance," Journal of Risk and Uncertainty, Springer, vol. 52(2), pages 117-136, April.
    16. Emily Oster & Ira Shoulson & E. Ray Dorsey, 2013. "Optimal Expectations and Limited Medical Testing: Evidence from Huntington Disease," American Economic Review, American Economic Association, vol. 103(2), pages 804-830, April.
    17. Nordström, Jonas & Thunström, Linda & Van ’T Veld, Klaas & Shogren, Jason F. & Ehmke, Mariah, 2023. "Strategic ignorance of health risk: its causes and policy consequences," Behavioural Public Policy, Cambridge University Press, vol. 7(1), pages 83-114, January.
    18. Michele Fioretti & Alexander Vostroknutov & Giorgio Coricelli, 2022. "Dynamic Regret Avoidance," American Economic Journal: Microeconomics, American Economic Association, vol. 14(1), pages 70-93, February.
    19. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory and Anticipatory Feelings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 55-79.
    20. Emanuel, Amber S. & Kiviniemi, Marc T. & Howell, Jennifer L. & Hay, Jennifer L. & Waters, Erika A. & Orom, Heather & Shepperd, James A., 2015. "Avoiding cancer risk information," Social Science & Medicine, Elsevier, vol. 147(C), pages 113-120.
    21. Fels, Markus, 2015. "On the value of information: Why people reject medical tests," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 56(C), pages 1-12.
    22. Cass R. Sunstein, 2019. "Ruining popcorn? The welfare effects of information," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 121-142, June.
    23. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    24. Gabillon, Emmanuelle, 2020. "When choosing is painful: Anticipated regret and psychological opportunity cost," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 644-659.
    25. Boeri, Marco & Longo, Alberto & Grisolía, José M. & Hutchinson, W. George & Kee, Frank, 2013. "The role of regret minimisation in lifestyle choices affecting the risk of coronary heart disease," Journal of Health Economics, Elsevier, vol. 32(1), pages 253-260.
    26. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    27. Niklas Karlsson & George Loewenstein & Duane Seppi, 2009. "The ostrich effect: Selective attention to information," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 95-115, April.
    28. Russell Golman & David Hagmann & George Loewenstein, 2017. "Information Avoidance," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 96-135, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zheng, Jiakun, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Journal of Health Economics, Elsevier, vol. 78(C).
    2. Jiakun Zheng, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Post-Print hal-04227414, HAL.
    3. Emmanuelle Gabillon, 2022. "Regret aversion and information aversion," Working Papers hal-03898012, HAL.
    4. Emmanuelle GABILLON, 2022. "Regret aversion and information aversion," Bordeaux Economics Working Papers 2022-12, Bordeaux School of Economics (BSE).
    5. Michele Fioretti & Alexander Vostroknutov & Giorgio Coricelli, 2022. "Dynamic Regret Avoidance," American Economic Journal: Microeconomics, American Economic Association, vol. 14(1), pages 70-93, February.
    6. Emmanuelle GABILLON, 2020. "When choosing is painful: anticipated regret and psychological opportunity cost," Bordeaux Economics Working Papers 2020-04, Bordeaux School of Economics (BSE).
    7. Kuang, Yunjuan & Ng, Chi To, 2018. "Pricing substitutable products under consumer regrets," International Journal of Production Economics, Elsevier, vol. 203(C), pages 286-300.
    8. Pierpaolo Battigalli & Martin Dufwenberg, 2022. "Belief-Dependent Motivations and Psychological Game Theory," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 833-882, September.
    9. Gabillon, Emmanuelle, 2020. "When choosing is painful: Anticipated regret and psychological opportunity cost," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 644-659.
    10. Michele Fioretti & Alexander Vostroknutov & Giorgio Coricelli, 2022. "Dynamic Regret Avoidance," SciencePo Working papers hal-03562318, HAL.
    11. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    12. Qin, Jie, 2015. "A model of regret, investor behavior, and market turbulence," Journal of Economic Theory, Elsevier, vol. 160(C), pages 150-174.
    13. Baojun Jiang & Chakravarthi Narasimhan & Özge Turut, 2017. "Anticipated Regret and Product Innovation," Management Science, INFORMS, vol. 63(12), pages 4208-4323, December.
    14. Daniele Pennesi, 2020. "Identity and information acquisition," Carlo Alberto Notebooks 610, Collegio Carlo Alberto, revised 2021.
    15. Elyès Jouini & Clotilde Napp, 2018. "The Impact of Health-Related Emotions on Belief Formation and Behavior," Theory and Decision, Springer, vol. 84(3), pages 405-427, May.
    16. Michenaud, Sébastien & Solnik, Bruno, 2008. "Applying regret theory to investment choices: Currency hedging decisions," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 677-694, September.
    17. Han Bleichrodt & Alessandra Cillo & Enrico Diecidue, 2010. "A Quantitative Measurement of Regret Theory," Management Science, INFORMS, vol. 56(1), pages 161-175, January.
    18. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2023. "Anticipation of deteriorating health and information avoidance," Journal of Health Economics, Elsevier, vol. 89(C).
    19. Korn, Olaf & Rieger, Marc Oliver, 2019. "Hedging with regret," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 192-205.
    20. Tianxin Zou & Bo Zhou & Baojun Jiang, 2020. "Product-Line Design in the Presence of Consumers’ Anticipated Regret," Management Science, INFORMS, vol. 66(12), pages 5665-5682, December.

    More about this item

    Keywords

    Information avoidance; Regret; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:69:y:2024:i:3:d:10.1007_s11166-024-09447-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.