When choosing is painful: Anticipated regret and psychological opportunity cost

摘要

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), a regret theory of choice is proposed which accommodates any feedback structure. We also show that the reference point in the regret utility function introduced by Quiggin (1994), does not systematically denote the impact of anticipated regret on utility. It can also embody the effect of another negative feeling related to the act of choosing, which we call Psychological Opportunity Cost (POC). While regret is felt after the choice, the POC is experienced at the very moment of choosing. Our model predicts that regret aversion yields information avoidance at decision time, as well as greater reluctance to take on risk. We also show that a regret-averse decision maker can exhibit correlation loving. Equally, our model sheds new light on experimental studies about suboptimal choices, such as inaction inertia. (c) 2020 Elsevier B.V. All rights reserved.