Regret and disappointment in experimental economic games. 

Researcher: Luis F. Martinez

Three experiments led by Nova SBE’s Professor Luis Martinez and co-author Marcel Zeelenberg showed that regret and disappointment, though both negatively valenced emotional states, have distinct effects on trust (and trustworthiness). Regret elicited both lower initial transfers and returns in a trust game. Conversely, disappointment gave rise to both higher initial transfers and returns in the same game. The findings once again demonstrate that emotions play a crucial role on decision-making. 

Trust
As two major components of social capital, trust and trustworthiness are undeniably keystones in economic development. Trust is the belief that others act in the interest of fairness and social welfare rather than their own self-interest, whereas trustworthiness is the extent to which trust in a person is justified. This deliberate willingness of individuals to make themselves vulnerable to the actions of others and the subsequent reciprocity by these others are essential conditions in order to accomplish successful transactions. Whenever these elements of social capital are absent, that hinders dramatically the quantity and quality of exchanges that take place between agents, thus dampening the efficient trade of goods and services.

Key findings
The main experimental workhorse in scientific research on trust is the trust game. This game models interactions between people and provides insight into whether fairness and social welfare may influence decisions rather than pure self-interest. The researchers examined the role of incidental regret and disappointment in this game. Their experiments revealed that regret decreased trust (and trustworthiness), whereas disappointment increased it.

These findings extend previous research insights that negative emotions decrease trust. They found this to be the case for regret, but the opposite happened for disappointment. In their view, participants feeling disappointment see investing more money and increasing their reciprocity levels as a vehicle for “preventing disappointment in themselves and in others” and as a possibility of a better final outcome for themselves and the other. On the contrary, participants feeling regret see investing less money and decreasing their reciprocity levels as a means of “correcting one’s mistakes”, also shielding themselves from the possibility of experiencing more regret.

Implications
More broadly, the empirical demonstration of these differential effects of regret and disappointment contributes to the understanding of how emotions affect interpersonal decision-making. Specifically, disappointment appears to be particularly relevant as a motivator of trust and cooperation, whereas regret elicited opposite findings. This is consistent with the finding that consumers share their disappointing experiences more than their regretful experiences, which together suggests that disappointment is more of a social emotion than regret. In sum, these findings reveal differential effects of regret and disappointment on trust game behavior and thereby contribute to our understanding of how and when agents act purely rationally or take the behavior and interests of others into account.

This article is based on the paper “Trust me (or not): Regret and disappointment in experimental economic games” authored by Luis F. Martinez, Assistant Professor of Consumer Behavior and Decision Making at Nova SBE and Marcel Zeelenberg (Tilburg University), published in 2015 in Decision, Vol. 2 No. 2, pp. 118-126.© American Psychological Association