Regulatory Focus and Decision Rules: Are Promotion-Focused Consumers Utility Maximizers and Prevention-Focused Consumers Regret Minimizers?

Abstract

This study aims to investigate the potential consumer-specific driver for decision rules between utility maximization or regret minimization in discrete choice modeling to gain a better understanding of consumers’ decision process, while introducing the random regret minimization (RRM) model in marketing to examine consumer choices. Drawing upon regulatory focus theory, we posit that promotion-focused consumers, who are inclined to maximize their opportunities, are more likely to be utility maximizers while prevention-focused consumers, who are inclined to minimize negative outcomes, are more likely to be regret minimizers. Using a finite mixture discrete choice model of utility-maximizing and regret-minimizing behavioral classes, we confirm our hypotheses with an online choice-based conjoint experiment data on US consumers. Our empirical findings further suggest that, while the RRM alone can perform as well as the conventional multinomial logit, it is important to incorporate structural heterogeneity to gain additional insights on consumer preference and the market structure.