Impact of regulatory focus on ambiguity aversion

Abstract

Although prior research has shown that some people prefer a risky to an ambiguous option, this study further proposes that people's regulatory focus (promotion vs. prevention) might influence their ambiguity aversion. Three experiments have tested whether people with promotion focus showed less ambiguity aversion than those with prevention focus: The first experiment revealed that, compared with chronically promotion-focused individuals, prevention-focused subjects preferred a risky to an ambiguous option. In the second experiment, priming of the subjects' goal orientations led to similar results. Experiment 3 demonstrated that participants showed less ambiguity aversion for the expected performance of an investment product representative of promotion (e.g., a stock fund) rather than one representative of prevention (e.g., a bond fund). In other words, people showed less preference for a bond fund when the probability distribution of its expected performance was unknown than when it was known, whereas they showed less preference difference between known and unknown probability distributions for the expected performance of a stock fund. This study has integrated research pertaining to regulatory focus and ambiguity aversion, and the results have confirmed that the impact of regulatory focus on ambiguity aversion is robust across different methods and decision tasks.

The effect of CEO regulatory focus on changes to investments in R&D

“…Because promotion‐focused individuals are open to change when faced with decisions (Crowe & Higgins, 1997), they may be more willing to increase allocations to a firm's R&D. They are also more comfortable with ambiguity (Hmieleski & Baron, 2008; Liu, 2011) suggesting that they will be more comfortable investing resources toward initiatives with uncertain outcomes. They may increase R&D spending to try to improve R&D activities, including to produce new innovations, despite the inherent uncertainty.…”

The Effects of Product Innovation Locus on Consumers Adoption of New Products—Based on Regulatory Focus and Information Processing Fluency

“…Existing studies have found that people's behaviors are affected by the regulatory fit. The regulatory fit will change the individual behaviors, including the risk decision, persuade attention and business decisions [24] [25] [26] Regulatory fit will also make individual generate a sense of right and enhance the individual behavior motivation. It has positive influence on decision-making behavior and products evaluation attitude.…”

The Role of Regulatory Focus in How Much We Care About Enemies

“…Participants were asked to rate seven negative emotions (e.g., insecure, scared, and distressed) in enemyship. 2 Some studies suggested that people with different regulatory focus respond differently to the contexts varying in the degree of uncertainty (e.g., Halamish, Liberman, Higgins, & Idson, 2008; Liu, 2011). To explore potential variations across contexts regarding the uncertainty level associated with the enemies, we asked participants to report their emotional experiences in three situations: when they fully understood the current situation of their enemies, when they only had partial information about the current situation of their enemies, and when they had no idea about the current situation of their enemies.…”