A Generalized Utility Model of Disappointment and Regret Effects on Post-Choice Valuation

Abstract

In this paper we show that performance information about “forgone” alternatives (i.e., alternative that were considered but not chosen) can have a significant impact on post-choice valuation. Our approach introduces a new and parsimonious way of looking at satisfaction that combines the literature on post-choice valuation with research regarding generalized expected utility theory. While the post-valuation literature focuses on the selected brand as the valuation's basis (e.g., Anderson and Sullivan [Anderson, E. W., M. W. Sullivan. 1993. The antecedents and consequences of customer satisfaction for firms. Marketing Sci. 12(Spring) 125–143.], Bolton and Drew [Bolton, R., J. Drew. 1991. A multistage model of customers' assessments of service quality and value. J. Consumer Res. 17 375–384.]), we draw on a stream of research in generalized expected utility theory that considers both chosen and forgone alternatives as the basis for valuation (e.g., Bell [Bell, D. 1983. Risk premiums for decision regret. Management Sci. 29 1156–1166 and Bell, D. 1985. Disappointment in decision making under uncertainty. Oper. Res. 33 1–27.]; Loomes and Sugden [Loomes, G., R. Sugden. 1982. Regret theory: An alternative theory of rational choice under uncertainty. The Econom. J. 92 805–824 and Loomes, G., R. Sugden. 1986. Disappointment and dynamic consistency in choice under uncertainty. Rev. Econom. Stud. 53 271–282.]). The result is a combined model of post-choice valuation that explicitly incorporates both concepts. Specifically, we extend the existing paradigm of post-choice valuation to include buyers' regret concerning forgone alternatives, proposing a generalized utility theory-based treatment of post-choice product assessment that uses the intuitively appealing concepts of disappointment and regret as the basis. We propose a model for conceptualizing post-choice valuation that is consistent with the existing literature, discuss how this model extends the construct to consider the influence of forgone alternatives, and report results of an empirical test that contrasts our model to important recent work in the area (e.g., Boulding et al. [Boulding, W., A. Kalra, R. Staelin, V. A. Zeithaml. 1993. A dynamic process model of service quality: From expectations to behavioral intentions. J. Marketing Res. 30(February) 7–27.]). Our generalized model of post-choice valuation is based on the sum of three components that represent factors that may contribute to consumers' assessment of a chosen product or service. The first component is expected performance. The second component is disappointment, which captures the discrepancy between actual and expected performance (much as the disconfirmation construct in traditional satisfaction research). The third component is regret, which captures the difference between the performance of the chosen product/service and the performance of a forgone product/service. This perspective is useful in that risk is captured by the disappointment and regret terms, providing an intuitively appealing decomposition of post-choice valuation and offering several advances over previous representations of disappointment and regret. We test our model via a choice experiment. Participants in the empirical study were asked to make choices between successive lottery pairs. They were then given outcome feedback on the forgone alternative as well as on the chosen alternative in each lottery pair. Immediately following outcome feedback for each choice, subjects were asked to evaluate their decision. Our results clearly suggest an effect of regret on post-choice valuation—information about the forgone alternative influenced subjects' valuation of the chosen alternative. We also find evidence that, as predicted, the effects of disappointment and regret on post-choice valuation are asymmetric. Specifically, the negative effect of disappointment on post-choice valuation was greater than the positive effect of elation. Similarly, the negative effect of regret was greater than the positive impact of rejoicing. Our research offers five contributions to the literature on post-choice valuation. First, our results illustrate the advantage of using generalized utility theory as the basis for conceptualizing and modeling post-choice valuation. We derive a model of post-choice valuation that formally captures the components of disappointment and regret and show that the outcome of both the chosen alternative (through disappointment) and a forgone alternative (through regret) can influence the chosen alternative's valuation. Second, we formally integrate the concepts of disappointment and regret, which have been examined separately for many years, into a single model based on a multiattribute preference structure. Third, we argue that the effects of disappointment and regret on post-choice valuation are asymmetric and present empirical evidence in this regard. Fourth, our results suggest that word-of-mouth regarding forgone alternatives may affect post-choice valuation, extending research that has not heretofore considered forgone outcomes' role in this process. Finally, our development provides a preconsumption measure of “potential disappointment and regret” in modeling choice. At the time of choice, consumers may visualize the feelings of disappointment and/or regret that will be derived at consumption, taking into account both the chosen brand and forgone brands. Our generalized utility theory-based approach to the post-choice valuation construct can be useful in examining the role of disappointment and regret as preconsumption constructs.