“I should not have been so cautious!” A new look on regret regulation process for risky decisions Nawel AYADI Maîtres de conférences IAE de Toulouse, Université Toulouse I Capitole CRM, EAC-CNRS 5032 [email protected] Laurent BERTRANDIAS Maîtres de conférences IAE de Toulouse, Université Toulouse I Capitole CRM, EAC-CNRS 5032 [email protected] « Je n’aurais pas dû être aussi prudent ! » Un nouveau regard sur le processus de régulation du regret pour les décisions risquées Résumé Le consommateur essaie de réguler son émotion de regret en prenant des décisions capables de minimiser le regret ressenti. Les conséquences des décisions risquées sont inconnues amenant le consommateur à anticiper le regret éprouvé pour les différentes situations possibles. L’article suggère que le regret anticipé est ambivalent et distingue le classique regret anticipé d’une prise de risque excessive (ARERT) du regret anticipé d’une recherche excessive de sécurité (ARESS). Les résultats de notre expérience montrent que ces deux regrets exercent des effets contraires sur la prise de risque mais que ces effets sont modérés par l’intelligence émotionnelle du consommateur. Mots-clés : régulation du regret, regret anticipé, intelligence émotionnelle, prise de risque “I should not have been so cautious!” A new look on regret regulation process for risky decisions Abstract Consumers try to regulate regret by taking decisions which minimize regret experience. Risky decisions consequences are unknown leading consumers to anticipate regret for all possible situations. The article suggests that anticipated regret is ambivalent and distinguishes between “traditional” anticipated regret of an excessive risk-taking (ARERT) and anticipated regret of an excessive safety-seeking (ARESS). Our experimental results show that both regrets exert opposite effects upon risk-taking but these effects are moderated by consumer emotional intelligence. Key-words: regret regulation, anticipated regret, emotional intelligence, risk-taking “I should not have been so cautious!” A new look on regret regulation process for risky decisions1 Introduction Choosing between several options is much more difficult and frightening when gains and losses are only known after the choice. Nevertheless, for consumers and savers, these choices under uncertainty are rather frequent. For instance, consumers have very often to choose among numbers of insurance contracts covering different ranges of damages with different prices. Moreover, when savers decide to invest their money in more or less risky financial investments, they often arbitrate between two basic options: the secure one associated to a low outcome and the uncertain one which has a potential high return (Kwon and Lee, 2009). This kind of choice induces complex cognitive trade-offs between risk-taking and safety-seeking individual aspirations (Zeelenberg et al., 1996). They also may be influenced by emotional aspects. In particular, consumers’ choices under uncertainty may lead them to experience regret (Simonson, 1992; Zeelenberg et al., 1996). For instance, let us imagine a consumer who has to contract a housing insurance policy to guarantee electric damages. This policy offers two alternative options. The more expensive one includes a refund of damaged devices on the basis of their purchasing price. In the cheaper second option, compensations are indexed on the real value of devices taking depreciation into account. Whatever the chosen option, consumer may experience regret because he will know exactly in the future the amount of his losses. If the cheaper policy is selected, regret would appear if he has to suffer an electric incident and if most of his devices are damaged. If he chooses the expensive option without undergoing an electric incident, he might also regret his prudence. 1 L’article est écrit en anglais mais les lecteurs peuvent formuler leurs remarques en français. 1 Behavioral decision-making research suggests that anticipated emotions such as anticipated regret are important determinants of subsequent behaviors (Hetts et al., 2000; McConnell et al., 2000; Mellers, Schwartz and Ritov, 1999) and decision-making (Connolly and Butler, 2006, Simonson, 1992). Arbitration between risk and security is propitious to regret because individuals can exactly assess, when the decision outcomes are known, how much they have lost. The rejected alternative is the standard from which the amount of loss is appraised. In the previous example, consumers take risk when they favor the cheaper policy. Then, when they face up to an electric incident, they experience regret because they can precisely assess the amount of loss due to the incomplete refund of their damaged devices. On the contrary, consumers favor safety when they select the expensive insurance policy. They may experience regret if, after many years, they realize they have spent a lot without suffering any damage. According to Zeelenberg and Pieters (2007a), individuals implement strategies to regulate their regret process. Generally, their goal is to minimize or more basically to avoid their post-decisional regret feeling. They set up a comparison mechanism based on a counterfactual thinking by asking themselves the following question: what would be my outcomes if I choose the other alternative? Depending on the answer, individuals may take a high level of risk or, in the opposite, may privilege cautiousness and prudence in order to minimize their regret. We argue that the regulation process is more complex in risky decisions because such decisions convey two forms of regret: regret of excessive risk-taking (ARERT) and regret of excessive safety-seeking (ARESS) (see figure 1) Safer decisions Risky decisions Safety-seeking risk-taking tendency tendency ARESS ARERT Figure 1. Risk-taking continuum and anticipated regrets 2 Some researches have identified the role of anticipated regret upon risk-avoidance (Josephs et al., 1992; Simonson, 1992; Zeelenberg et al., 1996). This article intends to demonstrate that the effect of anticipated regret on risk decisions is not unilateral. It develops the idea that both types of anticipated regrets (ARESS and ARERT) influence, directly and in opposite way, risk-taking decision. Because ARESS is a rather new concept, it is also interesting to identify factors reinforcing its effect on risk-taking. Regret is conceptualized as a cognitively determined emotion (Bell, 1982). However, emotions can vary in terms of complexity. We propose that, for risk-averse consumers, the regret of excessive safety seeking (ARESS) is a more subtle emotion than regret of excessive risk-taking (ARERT). Consequently, ARESS should be emotional information that is difficult to decrypt and to exploit in the decisional process. For that reason, we assume that consumer emotional intelligence (CEI) (Kidwell, Hardesty and Childers, 2008a) could be a factor which helps consumers to associate ARESS and risky decision. Emotional Intelligence concept derives from Mayer and Salovey's (1997) and Salovey and Mayer’s (1990) conceptualization and definition as a human ability varying across individuals. More precisely, emotional intelligence does not reflect a single trait or ability but rather consists in a composite of distinct emotional reasoning abilities: perceiving, facilitating, understanding, and regulating emotions. The roles of emotional intelligence have been widely studied in the fields of human resources and strategic management but very insufficiently investigated in marketing. Kidwell, Hardesty and Childers (2008a, 2008b) argue that consumption acts involve specific situations (e.g. making choices within a set of options, interacting with salespersons) which require relevant emotional domain-specific concepts. In sum, it is necessary to adapt the general emotional intelligence concept and measurement to consumption context. In particular, we aim to show that the positive effect of ARESS upon risk-taking is strengthened by consumer emotional intelligence (CEI). This research conveys implications for consumers’ regret regulation theory and for companies proposing products 3 and services involving different levels and types of risks, such as insurance companies or banks. The first section of the research describes the theoretical and conceptual framework. The method of the empirical study is presented in the second section. Results are then detailed and followed by a general discussion and implications. 1. Theoretical and conceptual framework 1.1. Regret regulation process It is commonly accepted that a decision alternative is evaluated with regard to its expected outcomes, including emotional ones. According to Zeelenberg (1999, p. 94), regret, which is one of the most studied emotions, is "an emotion cognitively determined and tested when the individual carries out or imagines that its current situation could have been better if he/she had acted differently". Based on counterfactual thinking, regret is a cognitive and aversive emotion resulting from a comparison made by consumer facing a decision-making issue. However, this comparison can be very complicated. Indeed, assessing whether a choice would be regretful or not is not always that obvious. At the beginning, regret theory, introduced by Bell (1982) and Loomes and Sugden (1982), was based on action comparison (Zeelenberg et al., 1996). Recent research developed a new conception based on inaction (Arkes, Kung and Hutzel, 2002; Tsiros, 2009; Tykocinski and Pittman, 1998; Zeelenberg et