Probability of Regret: Anticipation of Uncertainty Resolution in Choice

Abstract

In choice between uncertain options, uncertainty may be eventually resolved for all options, or just for the chosen option. The findings described here demonstrate that preference between uncertain options is systematically affected by expectations concerning uncertainty resolution: Prospects which are less likely to yield worse outcome than the alternative are selected more often when all options are to be resolved (complete resolution). Two experiments examined choice between statistically independent lotteries for which the chances of being worse off with the low-risk alternative were nearly as high, or higher than the chances of being worse-off with the high-risk alternative. For these gamble pairs it was found that subjects who expected complete resolution chose the high-risk high-gain option more often than subjects who expected only their selected gamble to be resolved. A third experiment suggests that the preference changes due to resolution are related to the probability of the low-risk gamble yielding the worse obtained outcome. The results are interpreted as compatible with the hypothesis that in choosing between uncertain options, people are more inclined to compare outcomes per states of the world if they expect to learn what would have happened with each option. In those cases, the outcome of a foregone option is more likely to serve as a salient comparison point for evaluating the outcome of the selected option. An alternative explanation is also discussed.