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REGRET

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Regret: a cognitively enriched emotion embodying a feeling of responsibility fornegative outcomes of choices

Regret involves interactions between rational thinking (counterfactual reasoningabout alternative courses of action) and emotional ones (pain, feeling ofresponsibility for making the wrong choice)

WHATISREGRET?

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Early evidence: orbito-frontal cortex damaged subjets dont experience regret

How to assess the role of regret?

Two conditions:

1.no-choice condition (follow: a computer chooses for you)2.choice condition (choose)

Choice among lotteries with different feedbackconditions:

1.partial feedback: only the outcomes of the chosen lottery are shown

2.complete feedback: the outcome of both selected and unselected gamblesare made available to the subject

A NEUROIMAGINGSTUDYOFREGRET(CORICELLIETAL. 2005)

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EXPERIMENTALRESULTS

Subject heart rate is significantly higher in choose trials!

Wins/losses are reflected in variations of the ventral striatum (related toreward processing) only in the choose condition

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EXPERIMENTALRESULTS

In partial feedback conditions, brain activity is correlated to differences

between obtained and un-obtained outcomes of the selected lottery(disappointment)

In complete feedback, brain activity is correlated to differences between

outcomes of the selected lottery and the outcomes of the unselected one

(regret)

Orbito-frontal cortex discriminates between levels of regret/relief!

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REGRETANDEXPERIENCE

The proportion of regret-avoiding choices increases over

time with the cumulative experience of regret.

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THEORETICALATTEMPTSTOEXPLAINREGRET

Loomes and Sugden (1982): Regret theory

A utilitarian alternative to prospect theory

Preserves a rational flavor while accounting for most common EU

violations.

Preserves the independence property but does not require transitivity.

Basic idea: when choosing between two alternatives, individuals

anticipate regret for missed opportunities.

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REGRETTHEORY (1/2)

Novelty

Does not attempt at justifying observed violations Argues in favour of new framework able to explain them

Set up

Finite set of n possible states of the world (j) Each state probability pj

Individuals choose between actions A

Each A is a n-tuple of consequences x

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REGRETTHEORY (2/2)

Modified expected utility function

1. Choiceless utility2. Rejoice/regret utility

1. Choiceless utility

Independent of choice Used to define utility of consequences given states

2. Rejoice/regret

Determined by the difference in the choiceless utility ofconsequence given choice of chosen action (what is) and

of alternative possible options (what could have been)

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1. CHOICELESSUTILITY

Name comes from the fact that it is the utility one

would derive from a consequences without having

chosen it

Notation: choiceless utility of choosing action Ai over

action Ak, when state j occurs is

Modified utility of choosing Ai is

Assigns a real-valued index

iff

Difference between mijk and cij -> feeling of regret and

rejoice (see point 2)

Individuals choose maximizing the expected modifiedutility

),( kjijk

ij ccMm

n

j

k

ijj

k

i mpE1

ijc

ij

k

ij cm kjij cc

General

formulation of

the model

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2. REGRET/REJOICEFUNCTION

Difference between mijk and cij -> feeling of regret and

rejoice, in other words comparison between what itisand what could have been

Regret /rejoice function

R strictly increasing, 3-times differentiable with R(0)=0

Individuals use this function to try and anticipate the

utility of different choices

Individuals will prefer Ai to Ak when

)(kjijij

k

ij

ccRcm

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ANILLUSTRATIVEEXAMPLE

Consider three gambles A ,B, C defined over 3

possible states 1,2, 3.

Assume the decision maker tries to minimize the

regret he may feel

Let us look at pairwise comparisons

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State 1 (p=0.4) State 2 (p=0.3) State 3 (p=0.3)

A 10 3 3B 7.5 7.5 1


B 7.5 7.5 1

C 5 5 5


C 5 5 5

A 10 3 3

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A 10 3 3B 7.5 7.5 1


B 7.5 7.5 1

C 5 5 5


C 5 5 5

A 10 3 3

Largest scope for

regret in state 2

-> choose B

Largest scope for

regret in state 3-> choose C

Largest scope for

regret in state 1

-> choose A

Overall preference pattern emerging

B preferred to A, C preferred to B, BUT A preferred to C!?!

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ILLUSTRATIVEEXAMPLE (FORMALLY)

Looking at scope for maximum regret is a shortcut

Same results would be obtained applying the formula

A vs B -> 0.4(10-7.5+2.5-2.5)+0.3(3-7.5-4.5-4.5)+0.3(3-1+2-2)= -1.05

Choose B!

B vs C -> 0.4(7.5-5+2.5-2.5)+0.3(7.5-5+2.5-2.5)+0.3(1-5-4-4)= -1.85

Choose C!

C vs A -> 0.4(5-10-5-5)+0.3(5-3+2-2)+0.3(5-3+2-2)= -3.6 Choose A!

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IMPLICATIONSOFREGRETTHEORY

Assumes statistical independence between prospects

Write a unique matrix of state-contigent consequences

Able to incorporate common ration and common

consequence effects

Not violations of axiomatic properties but implications ofthe model

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ISSUESWITH REGRET THEORY

Preference relation is not necessarily transitive Complicates the picture when we deal with more than 2

options no preference ordering

Probabilities of the states of the world have to be known

Theory works on assumptions of unobservable functionsrather than behavioral axiom!

BUT represents the first challenge to the idea that

conventional axioms represent the only acceptable basis

of choice under uncertainty The first to discuss regret/rejoice in decision making

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SUGGESTEDREADINGS

Loomes, Sugden, Regret theory: an alternative theoryof rational choice under uncertainty, The Economic

Journal Vol.92, No. 368 (1982)

Corricelli et al, Regret and its avoidance: a

neuroimaging study of choice behavior. NaturalNeurosciences. 2005 Sep;8(9):1255-62. Epub 2005

Aug 7.

5. regret

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