Anticipated Regret and Product Innovation

Abstract

When a firm introduces a product with new features, some consumers may find it difficult to assess their valuations for these new attributes. Their purchase decisions made under such uncertainty may lead to postpurchase regret. It has been experimentally shown that consumers may anticipate their potential postpurchase regret and make their current choices to mitigate or minimize it. That is, a consumer’s anticipated regret can significantly impact his purchase decision. Given the trend that firms in various markets invoke regret to stimulate sales, this paper analytically explores whether and how anticipated regret affects competing firms’ profits and product innovation. Our analyses reveal that the presence of anticipated regret can increase or decrease firms’ profits, and foster or hinder product innovation depending on whether it makes the consumer segments more or less polarized; in other words, anticipated regret has a nonmonotonic effect on firms’ profits and the entrant’s optimal quality. Therefore, anticipated regret may sometimes create a win-win or a lose-lose situation for both firms. Regardless of whether the impact of anticipated regret on firms’ profits is positive or negative, the magnitude of that impact tends to be higher for the low-quality firm. This paper was accepted by J. Miguel Villas-Boas, marketing.

Behavioral Operations and Supply Chain Management–A Review and Literature Mapping

“…More recent studies have investigated the role of regret and risk taking and product innovations and product technology management (Jiang, Narasimhan, & Turut, ; Loch, ). Wuttke, Donohue, and Siemsen () investigate the main characteristics of innovation projects contributing to a supplier's acceptance of innovation and new product development through a controlled lab experiment.…”

Regret under different auction designs: the case of English and Dutch auctions

“…The presence of regret is known to negatively influence user satisfaction, repurchase intention, and the continuance of using a particular service (Kaur et al 2016). Even the anticipation of regret can influence user behavior: Users will adjust their choices in advance in order to mitigate or minimize the experience of regret, which consequently factors into users' final purchasing decisions (Greenleaf 2004;Jiang et al 2016). Similarly, studies have shown that incorporating regret in the utility function can explain some well-known behavioral anomalies, such as the Allais Paradox, the coexistence of insurance and gambling, the fact that people tend to be risk averse in the domain of gains and risk-loving in the domain of losses, probabilistic insurance, and preference reversals (see Engelbrecht-Wiggans and Katok 2008).…”

“…For instance, regret has been shown to depend on the specific information that is provided to the winners or losers of an auction (Engelbrecht-Wiggans 1989). Recently, regret has also been shown to depend on consumers' uncertainty about either the product's objective attributes (e.g., a product's quality) or the consumer's own preferences for a product's known attributes (Jiang et al 2016). Taking stock of these studies, our study seeks to better understand the antecedents of regret by enquiring into the effects of auction design associated with different degrees of bid disclosure on post-purchase regret.…”

“…Within the context of auctions, bidders may generally experience winner regret by believing they overpaid for a product in order to win an auction (Coricelli et al 2005;Engelbrecht-Wiggans 1989;Engelbrecht-Wiggans andKatok 2008, 2009;Gretschko and Rajko 2014;Katuscak et al 2015), and loser regret by bidding too low in an attempt to save money, thus losing the auction (Coricelli et al 2005;Engelbrecht-Wiggans 1989;Engelbrecht-Wiggans and Katok 2007, 2008Gretschko and Rajko 2014;Katuscak et al 2015). The extant literature has shown that both the postpurchase experience of regret, as well as the mere anticipation of it prior to purchasing a product, can influence users' bidding behavior and utility function (Hung et al 2007;Jiang et al 2016).…”

Dry Bulk Carrier Investment Selection through a Dual Group Decision Fusing Mechanism in the Green Supply Chain

“…For example, this information can be represented through linguistic two-tuples [19,20], interval-valued rough random variables [17], or hesitant fuzzy linguistic terms [18,21]. In addition, regret theory has an important role in decision theory, such as in the dynamic location problem [22], enterprise production, and marketing strategy [23].…”