Effect of Regret on Post-choice Valuation: The Case of More Than Two Alternatives

Abstract

The author examines the influence of experienced regret on the selection of the reference point used in post-choice valuation. He incorporates two reference points, expected performance and performance of the forgone alternative, the former affecting the amount of satisfaction and the latter affecting the amount of regret experienced by a decision maker. Prior research on regret has assumed only a two-alternative choice set with the forgone alternative being the reference point for measuring regret. The author relaxes that assumption and develops hypotheses to examine the selection of the reference point in cases that more closely represent real-life experience (i.e., choice sets with more than two alternatives). Two studies are reported. The results from the first study support most of the hypotheses. The second study further investigated the selection of a reference point. Several theoretical and managerial implications are discussed and future research directions are suggested.