Avoiding regret in decisions with feedback: A negotiation example
Regret theory (Bell, 1983) posits that learning about the outcome of a foregone alternative creates the possibility of experiencing regret. In a choice between a certain outcome and a gamble with a similar expected value, regret theory predicts the following: Decision makers will be more likely to choose the certain outcome when they expect they will not learn the outcome of the gamble than when they expect they will. The difference in risk aversion between these two feedback conditions is a measure of regret aversion. In this study, a negotiation exercise was used to examine how the expectation of receiving feedback on a foregone alternative influenced negotiators′ risk preferences. Consistent with the regret theory prediction, we found subjects to be more risk averse in their negotiation decisions when they did not expect feedback on a foregone risky alternative than when they did. As a consequence, negotiators who did not expect feedback on a foregone risky alternative were more likely to reach agreement in their negotiation than were negotiators who did expect feedback. The results have implications for the importance of considering motivational factors, such as regret avoidance, in both decision and negotiation theories. © 1995 Academic Press. All rights reserved.
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