Why do we anticipate regret before we make a decision?

Regret Aversion

, explained.
Bias

What is Regret Aversion?

Regret aversion occurs when a decision is made to avoid regretting an alternative decision in the future. Regret can be a powerless and discomforting state and people sometimes make decisions in order to avoid this outcome.

Where it occurs

Have you ever made a choice where you were explicitly aware of the influence of potential future regret on your decision-making? This could be that backpacking trip in Europe that you had to do because one day you might regret not going. It could be that impulsive purchase during a limited time offer where you tell yourself, “I know if I don’t get it, I’ll probably regret it later.”

While sometimes this sense of regret can just be a rationalization for a certain decision, it can also be a strong emotion that guides your preferences. And while such decisions driven by regret aversion can lead to ideal outcomes, they can also lead us astray.

Related Biases

Sources

  1. Seiler, M., Seiler, V., Traub, S., & Harrison, D. (2008). Regret aversion and false reference points in residential real estate. Journal of Real Estate Research, 30(4), 461-474.
  2. Abraham, C., & Sheeran, P. (2004). Deciding to exercise: The role of anticipated regret. British journal of health psychology, 9(2), 269-278.
  3. Engelbrecht-Wiggans, R. (1989). The effect of regret on optimal bidding in auctions. Management Science, 35(6), 685-692.
  4. Coricelli, G., Critchley, H. D., Joffily, M., O'Doherty, J. P., Sirigu, A., & Dolan, R. J. (2005). Regret and its avoidance: a neuroimaging study of choice behavior. Nature neuroscience, 8(9), 1255-1262.
  5. Rempel-Clower, N. L. (2007). Role of orbitofrontal cortex connections in emotion. Annals of the New York Academy of Sciences, 1121(1), 72-86.
  6. Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263.
  7. Brewer, N. T., DeFrank, J. T., & Gilkey, M. B. (2016). Anticipated regret and health behavior: A meta-analysis. Health Psychology, 35(11), 1264.
  8. Michenaud, S., & Solnik, B. (2008). Applying regret theory to investment choices: Currency hedging decisions. Journal of International Money and Finance, 27(5), 677-694.
  9. Gilbert, D. T., Morewedge, C. K., Risen, J. L., & Wilson, T. D. (2004). Looking forward to looking backward: The misprediction of regret. Psychological Science, 15(5), 346-350.
  10. Loomes, G., & Sugden, R. (1982). Regret theory: An alternative theory of rational choice under uncertainty. The economic journal, 92(368), 805-824.

About the Authors

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Dan Pilat

Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.

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Dr. Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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