IDEAS home Printed from https://ideas.repec.org/a/spr/grdene/v22y2013i3d10.1007_s10726-012-9282-x.html
   My bibliography  Save this article

The Effect of Feedback on Process and Outcome of Loan Negotiations: Consequences on Risk Aversion and the Willingness to Compromise

Author

Listed:
  • Erik Hoelzl

    (University of Cologne)

  • Luise Hahn

    (University of Vienna)

  • Maria Pollai

    (University of Vienna)

  • Jan Masak

    (Volkswagen Sarajevo d.o.o.)

Abstract

We examined the influence of feedback regarding alternatives on risk aversion and willingness to compromise in student loan negotiations. In a simulated negotiation, participants in the roles of bank advisors and clients received feedback about alternative offers either only after an impasse of the negotiation, or regardless of outcome. When receiving feedback only after an impasse, participants tried to avoid the regret-eliciting feedback and therefore set less ambitious goals and showed higher willingness to compromise. In particular, they set a less ambitious reservation price and estimated a less beneficial ‘best alternative to negotiated agreement’. When analyzing the process of the negotiation, we found that they made less favorable offers more quickly and arrived at less favorable final offers. They sacrificed their previously set goals by violating their reservation prices and underbidding their estimated ‘best alternative to negotiated agreement’ more often. Therefore, they showed a higher potential for agreement with the other party, but at the cost of less favorable outcomes. Results indicate that anticipated regret could contribute to suboptimal negotiation outcomes in the context of student loans, which might lead to long term dissatisfaction.

Suggested Citation

  • Erik Hoelzl & Luise Hahn & Maria Pollai & Jan Masak, 2013. "The Effect of Feedback on Process and Outcome of Loan Negotiations: Consequences on Risk Aversion and the Willingness to Compromise," Group Decision and Negotiation, Springer, vol. 22(3), pages 541-559, May.
    • Handle: RePEc:spr:grdene:v:22:y:2013:i:3:d:10.1007_s10726-012-9282-x
    DOI: 10.1007/s10726-012-9282-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10726-012-9282-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10726-012-9282-x?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. Alice F. Stuhlmacher & Matthew V. Champagne, 2000. "The Impact of Time Pressure and Information on Negotiation Process and Decisions," Group Decision and Negotiation, Springer, vol. 9(6), pages 471-491, November.
    2. Brown, Sarah & Taylor, Karl & Wheatley Price, Stephen, 2005. "Debt and distress: Evaluating the psychological cost of credit," Journal of Economic Psychology, Elsevier, vol. 26(5), pages 642-663, October.
    3. Larrick, Richard P. & Boles, Terry L., 1995. "Avoiding Regret in Decisions with Feedback: A Negotiation Example," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(1), pages 87-97, July.
    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. Hayhoe, Celia Ray & Leach, Lauren & Turner, Pamela R., 1999. "Discriminating the number of credit cards held by college students using credit and money attitudes," Journal of Economic Psychology, Elsevier, vol. 20(6), pages 643-656, December.
    6. Zeelenberg, Marcel & Pieters, Rik, 2004. "Consequences of regret aversion in real life: The case of the Dutch postcode lottery," Organizational Behavior and Human Decision Processes, Elsevier, vol. 93(2), pages 155-168, March.
    7. Ritov, Ilana & Baron, Jonathan, 1995. "Outcome Knowledge, Regret, and Omission Bias," Organizational Behavior and Human Decision Processes, Elsevier, vol. 64(2), pages 119-127, November.
    8. Zeelenberg, Marcel & Beattie, Jane & van der Pligt, Joop & de Vries, Nanne K., 1996. "Consequences of Regret Aversion: Effects of Expected Feedback on Risky Decision Making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(2), pages 148-158, February.
    9. 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.
    10. Hoelzl, Erik & Pollai, Maria & Kamleitner, Bernadette, 2009. "Experience, prediction and recollection of loan burden," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 446-454, June.
    11. Thomas A. Flint, 1997. "Predicting Student Loan Defaults," The Journal of Higher Education, Taylor & Francis Journals, vol. 68(3), pages 322-354, May.
    12. Bruce Barry, 2008. "Negotiator affect: the state of the art (and the science)," Group Decision and Negotiation, Springer, vol. 17(1), pages 97-105, January.
    13. Pieters, Rik & Zeelenberg, Marcel, 2005. "On bad decisions and deciding badly: When intention-behavior inconsistency is regrettable," Organizational Behavior and Human Decision Processes, Elsevier, vol. 97(1), pages 18-30, May.
    14. Reb, Jochen, 2008. "Regret aversion and decision process quality: Effects of regret salience on decision process carefulness," Organizational Behavior and Human Decision Processes, Elsevier, vol. 105(2), pages 169-182, March.
    15. Haultain, Steve & Kemp, Simon & Chernyshenko, Oleksandr S., 2010. "The structure of attitudes to student debt," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 322-330, June.
    16. Lewis, Alan & van Venrooij, Marlies, 1995. "A note on the perceptions of loan duration and repayment," Journal of Economic Psychology, Elsevier, vol. 16(1), pages 161-168, March.
    17. Davies, Emma & Lea, Stephen E. G., 1995. "Student attitudes to student debt," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 663-679, December.
    18. Daniel Druckman & Mara Olekalns, 2008. "Emotions in negotiation," Group Decision and Negotiation, Springer, vol. 17(1), pages 1-11, January.
    19. Charles L. Gruder, 1971. "Relationships with opponent and partner in mixed-motive bargaining," Journal of Conflict Resolution, Peace Science Society (International), vol. 15(3), pages 403-416, September.
    20. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    21. Zeelenberg, Marcel & Beattie, Jane, 1997. "Consequences of Regret Aversion 2: Additional Evidence for Effects of Feedback on Decision Making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 72(1), pages 63-78, October.
    22. Chen, Haiyang & Volpe, Ronald P., 1998. "An Analysis of Personal Financial Literacy Among College Students," Financial Services Review, Elsevier, vol. 7(2), pages 107-128.
    23. Barry, Bruce & Oliver, Richard L., 1996. "Affect in Dyadic Negotiation: A Model and Propositions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 67(2), pages 127-143, August.
    24. Connolly, Terry & Reb, Jochen, 2003. "Omission bias in vaccination decisions: Where's the "omission"? Where's the "bias"?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 91(2), pages 186-202, July.
    25. Daniel Druckman, 1994. "Determinants of Compromising Behavior in Negotiation," Journal of Conflict Resolution, Peace Science Society (International), vol. 38(3), pages 507-556, September.
    26. Zeelenberg, M. & Pieters, R., 2004. "Consequences of regret aversion in real life : The case of the Dutch postcode lottery," Other publications TiSEM d16cb90a-f96c-4fce-b4c7-4, Tilburg University, School of Economics and Management.
    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. Reb, Jochen, 2008. "Regret aversion and decision process quality: Effects of regret salience on decision process carefulness," Organizational Behavior and Human Decision Processes, Elsevier, vol. 105(2), pages 169-182, March.
    2. Reb, Jochen & Connolly, Terry, 2009. "Myopic regret avoidance: Feedback avoidance and learning in repeated decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 109(2), pages 182-189, July.
    3. van de Calseyde, Philippe P.F.M. & Zeelenberg, Marcel & Evers, Ellen R.K., 2018. "The impact of doubt on the experience of regret," Organizational Behavior and Human Decision Processes, Elsevier, vol. 149(C), pages 97-110.
    4. Sugden, Robert & Wang, Mengjie & Zizzo, Daniel John, 2019. "Take it or leave it: Experimental evidence on the effect of time-limited offers on consumer behaviour," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 1-23.
    5. Carlin, Bruce I. & Robinson, David T., 2009. "Fear and loathing in Las Vegas: Evidence from blackjack tables," Judgment and Decision Making, Cambridge University Press, vol. 4(5), pages 385-396, August.
    6. Hoelzl, Erik & Loewenstein, George, 2005. "Wearing out your shoes to prevent someone else from stepping into them: Anticipated regret and social takeover in sequential decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 98(1), pages 15-27, September.
    7. Zeelenberg, Marcel & van Dijk, Wilco W. & van der Pligt, Joop & Manstead, Antony S. R. & van Empelen, Pepijn & Reinderman, Dimitri, 1998. "Emotional Reactions to the Outcomes of Decisions: The Role of Counterfactual Thought in the Experience of Regret and Disappointment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 75(2), pages 117-141, August.
    8. Zeelenberg, M. & van Dijk, W.W. & van der Pligt, J. & Manstead, A.S.R. & van Empelen, P. & Reinderman, D., 1998. "Emotional reactions to the outcomes of decision : The role of counterfactual thought in the experience of regret," Other publications TiSEM eafc28f9-18d6-4b76-b70f-3, Tilburg University, School of Economics and Management.
    9. George, Jennifer M. & Dane, Erik, 2016. "Affect, emotion, and decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 47-55.
    10. Ang, Dionysius & Diecidue, Enrico & Dewitte, Siegfried, 2022. "To deliberate or not? The effects of anticipated regret and deliberation on willingness-to-pay," Journal of Business Research, Elsevier, vol. 151(C), pages 563-578.
    11. Zeelenberg, Marcel & Pieters, Rik, 2004. "Consequences of regret aversion in real life: The case of the Dutch postcode lottery," Organizational Behavior and Human Decision Processes, Elsevier, vol. 93(2), pages 155-168, March.
    12. Krähmer, Daniel & Stone, Rebecca, 2005. "Regret in Dynamic Decision Problems," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 71, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Jhunjhunwala, Tanushree, 2021. "Searching to avoid regret: An experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 298-319.
    14. Inman, J.J. & Zeelenberg, M., 1998. ""Wow, I could've had a V8!" : The role of regret in consumer choice," Discussion Paper 1998-79, Tilburg University, Center for Economic Research.
    15. Zeelenberg, M. & van Dijk, W.W. & Manstead, A.S.R., 1998. "Reconsidering the relation between regret and responsibility," Other publications TiSEM fa17bcac-aab0-4f37-8183-5, Tilburg University, School of Economics and Management.
    16. Zeelenberg, Marcel & van Dijk, Wilco W. & Manstead, Antony S. R., 1998. "Reconsidering the Relation between Regret and Responsibility," Organizational Behavior and Human Decision Processes, Elsevier, vol. 74(3), pages 254-272, June.
    17. Zeelenberg, Marcel & Beattie, Jane, 1997. "Consequences of Regret Aversion 2: Additional Evidence for Effects of Feedback on Decision Making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 72(1), pages 63-78, October.
    18. Inman, J.J. & Zeelenberg, M., 1998. ""Wow, I could've had a V8!" : The role of regret in consumer choice," Other publications TiSEM 65a1916f-f531-420e-a78c-7, Tilburg University, School of Economics and Management.
    19. van de Ven, Niels & Zeelenberg, Marcel, 2011. "Regret aversion and the reluctance to exchange lottery tickets," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 194-200, February.
    20. Lim, Jooyoung & Hahn, Minhi, 2020. "Regulatory focus and decision rules: Are prevention-focused consumers regret minimizers?," Journal of Business Research, Elsevier, vol. 120(C), pages 343-350.

    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:spr:grdene:v:22:y:2013:i:3:d:10.1007_s10726-012-9282-x. 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.