Wednesday, February 16th, 2011

The price of regret

We have always suspected that people will forego material gain in order to avoid regretting their choices. For instance, experiments have repeatedly found that people who are given lottery ticket will be reluctant to change it for another ticket for the same lottery, even if they are offered a bonus for doing so.

Now, a study by two social psychologists in The Netherlands suggests that the reason for this reluctance is likely to be the anticipation of regret. They conclude this from two slightly different versions of the lottery ticket experiment. In the first, they put the first ticket in a sealed envelope, so that the recipient couldn’t see its number. In the second, they told recipients the number of the second ticket they would be exchanging their original one for. In both cases, subjects were much more likely to exchange their tickets.

The explanation is pretty straightforward: people who did not know the number of their original lottery ticket could not possibly regret having traded it because they would never know what number it was and thus whether it won or not. So they took up the offer of a bonus and traded. Similarly, knowing the number of the second ticket opened the door for them to regret not having traded —if the second ticket won. So again, they took the bonus offer and traded away.

Thanks for the pointer to Freakonomics.

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