CONSEQUENCES OF REGRET AVERSION - EFFECTS OF EXPECTED FEEDBACK ON RISKY DECISION-MAKING

Previous research has considered the question of how anticipated regre t affects risky decision making. Several studies have shown that antic ipated regret forces participants towards the safe option, showing ris k-aversion. We argue that these results are due to the previous confou nding of the riskiness of the options with the feedback received. Our design unconfounds these factors, and we predict that participants wil l always tend to make regret-minimizing choices (rather than risk-mini mizing choices). We present three experiments using a ''choices betwee n equally valued alternatives'' paradigm. In these experiments we mani pulate whether the risky or safe gamble is the regret-minimizing choic e by manipulating which gamble(s) will be resolved. As predicted, part icipants tend to choose the regret-minimizing gamble in both gains and losses and in both relatively high risk and relatively low risk pairs of gambles. We consider the implications of these results for the rol e of regret in choice behavior. (C) 1996 Academic Press, Inc.