Directory UMM :Data Elmu:jurnal:J-a:Journal of Economic Psychology:Vol21.Issue3.Jun2000:
Journal of Economic Psychology 21 (2000) 223±232
www.elsevier.com/locate/joep
Deciding to sell: The eect of prior inaction and oer source
Adam Butler
a
a,*
, Scott Highhouse
b
Department of Public and Environmental Aairs, University of Wisconsin-Green Bay, USA
b
Department of Psychology, Bowling Green State University, USA
Received 6 July 1998; received in revised form 16 June 1999; accepted 3 November 1999
Abstract
Recent research has shown that decision makers are less likely to accept an opportunity
after failing to act on a previous oer, an eect labeled inaction inertia. We extended the
original research by examining the phenomenon in the domain of losses as well as in the
domain of gains. A pattern consistent with the inaction inertia eect was found for gains but
not for losses. We also manipulated the source of the second oer and found that evaluations
of gains decreased after inaction regardless of source, but evaluations of losses increased when
the second oer came from a dierent source. Evaluations of the oer were highly correlated
with ratings of anticipated regret, suggesting that the avoidance of negative emotions may be
partially responsible for the eect. Ó 2000 Elsevier Science B.V. All rights reserved.
PsycINFO classi®cation: 3660; 3020; 3920
JEL classi®cation: D23; E49
Keywords: Inaction inertia; Regret; Decision making persistence
*
Corresponding author. Present address: Department of Psychology, University of Northern Iowa,
Cedar Falls, IA 50614-0505, USA. Tel.: +1-319-273-7293; fax: +1-319-273-6188.
E-mail address: [email protected] (A. Butler).
0167-4870/00/$ - see front matter Ó 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 1 6 7 - 4 8 7 0 ( 0 0 ) 0 0 0 0 2 - 7
224
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
1. Introduction
The tendency to persist in a state of action is a well-known phenomenon in
psychology. Research on compliance, for instance, demonstrates that an
initial action can induce commitment to a subsequent action undertaken at a
higher cost (Beaman, Cole, Preston, Klentz & Steblay, 1983). Research on
decision making shows that individuals who sustain a loss as a result of their
action escalate their commitment to the course of action (Staw, 1981). Recently, Tykocinski, Pittman and Tuttle (1995) found a similar eect operating
in cases of inaction. That is, when individuals failed to act on a decision
opportunity, they were likely to persist in the course of inaction when confronted with a subsequent decision, an eect labeled ``inaction inertia''.
In their original studies of inaction inertia, Tykocinski et al. (1995) found
that participants who failed to act on an initial opportunity were less likely to
act on a second, somewhat less desirable opportunity compared to participants who did not experience inaction. In one of their vignettes, participants
were given the opportunity to enroll in a frequent ¯ier program which would
earn a free ticket with the accumulation of 20,000 miles. Participants were
told that if they joined the program, they would earn 5500 miles. In the prior
inaction condition, participants were told that they passed on the opportunity to join the program earlier in the year which would have earned them
10,000 miles. Inaction inertia was demonstrated when participants in the
prior inaction condition were signi®cantly less likely to join the program than
participants with no prior inaction. The authors replicated the inaction inertia eect in monetary and non-monetary scenarios and also behaviorally in
a gambling decision.
1.1. Theoretical explanations of inaction inertia
Two explanations have been proposed for the inaction inertia eect. The
cognitive explanation is that the eect arises from an anomaly in mental
accounting. In the frequent ¯ier vignette, participants in both the inaction
and no inaction conditions stand to gain the same amount (i.e., 5500 miles).
However, in the context of a failure to act on a more attractive opportunity
(i.e., 10,000 miles), the less attractive opportunity may be perceived as a loss
rather than a gain (i.e., a loss of 4500 miles). That is, participants appear to
use the foregone gain as a reference point from which to evaluate the second
opportunity.
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
225
Tykocinski et al. (1995) tested the mental accounting explanation by manipulating the salience of the future gain or foregone opportunity. Attention
was focussed on future gains by telling participants that they could still earn
free miles by accepting the oer. Attention was focused on foregone bene®ts
by telling participants that they lost free miles by not accepting the initial
oer. A third group of participants did not receive any framing manipulation.
Tykocinski et al. found that participants in the loss frame and control conditions were less likely to accept the second opportunity than participants
who received a gain frame. Thus, in the absence of any framing information,
the second opportunity may automatically be perceived as a loss.
An alternative, motivationally based explanation is that inaction inertia
represents an attempt to avoid the emotional experience of regret. Regret
theory assumes that decision makers compare actual outcomes to other,
foregone outcomes and feel regret if the foregone outcome is superior to the
actual (Loomes & Sugden, 1982). The theory further assumes that emotions
are anticipated prior to choice and that they in¯uence decisions. Numerous
studies indicate that decision makers make choices that minimize anticipated
regret (Zeelenberg, 1999; Zeelenberg, Beattie, Pligt & Vries, 1996).
The experience of regret is based on imagined alternative outcomes, and
one factor which in¯uences the imagination of alternatives is whether the
actual outcome resulted from action or inaction. Research demonstrates that,
in the short term, action is regretted more than inaction because it is much
easier to imagine counterfactual alternatives after an action (Gilovich &
Medvec, 1995; Kahneman & Miller, 1986; Zeelenberg, van der Pligt &
Manstead, 1998). For example, a person who decides to enroll in the frequent
¯ier program after failing to enroll earlier is more likely to be plagued by ``if
only'' type thoughts than one who never enrolls. By not acting, the decision
maker reduces the possibility of imagining what might have been and thereby
minimizes the negative emotional experience of regret (Tykocinski & Pittman, 1998).
Tykocinski and Pittman (1998) reasoned that making the counterfactual,
foregone opportunity dicult to avoid would decrease inaction inertia because inaction would no longer be an eective strategy to minimize regret. In
four studies, they found that when avoidance of the foregone opportunity
was impossible, costly, or unnecessary, the likelihood of acting on the second
opportunity increased. When asked to provide reasons for their decisions,
participants were most likely to list thoughts suggesting regret when avoidance of the foregone opportunity was possible. A similar study by Hutzel and
Arkes (1997) found that regret and inaction inertia were more likely when an
226
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
initial, foregone purchasing opportunity was geographically closer and,
therefore, more dicult to avoid.
These studies suggest that inaction is a strategy that allows decision
makers to avoid the missed opportunity and, in eect, reduce the experience
of counterfactual regret.
1.2. The present study
We sought to extend the original research by Tykocinski and his colleagues
(Tykocinski et al., 1995; Tykocinski & Pittman, 1998) in several ways. First,
we examined whether inaction inertia occurs in the domain of losses as well
as gains. Although participants in the Tykocinski et al. (1995) studies appeared to frame outcomes as losses, they were nevertheless faced with absolute gains in all of the experimental conditions. It is unclear whether this
phenomenon occurs when people are facing clear losses or are in the loss
domain. Consider, for example, a situation in which a stock holder learns
that her stock has declined in value one dollar per share. Instead of selling,
the stockholder decides to hold ®rm, only to ®nd that the stock has declined
another dollar the following day. Would this person be less likely to sell the
stock than one who learns that his stock has declined two dollars per share?
The answer to this question is not straightforward. On the one hand, we
might expect that the second stock holder perceives a two dollar loss per
share, whereas the ®rst may perceive both the overall loss plus a one dollar
loss from the previous day. This would likely result in the inaction inertia
found by Tykocinski et al. (1995). On the other hand, one might argue that
the stock holder who passed on the initial opportunity to sell shifted her
reference point down to minus one dollar. In the same way that an absolute
gain is perceived as a relative loss after a more attractive missed gain, an
absolute loss might be perceived as relatively smaller following a previous
loss. Thus, the second loss in the example would be perceived as only an
incremental loss of one dollar (compared to the two dollar loss experienced
by the second stock holder). This might result in no inaction inertia for the
®rst stock holder.
A second way in which we sought to extend the original research on inaction inertia was by changing the source of the second oer. In each of the
previous experiments on the phenomenon, the ®rst and second oers have
come from the same source or involved two dierent commodities. According
to the mental accounting explanation, people who fail to act on a previous
opportunity will shift their reference point to the ®rst oer in evaluating
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
227
subsequent oers. One might expect that presenting the second oer as
coming from a dierent source would weaken the eect. That is, participants
should be less likely to use the ®rst oer as a reference point when it came
from a dierent source than the second oer.
In addition to examining evaluations of the oer, we also examined anticipated regret. Tykocinski and Pittman (1998) measured regret in one of
their four studies using a thought listing procedure. In the present study, we
developed a scale to directly measure anticipated regret. As a replication of
Tykocinski and Pittman (1998), we predicted that inaction inertia (i.e., lower
evaluations) would be associated with feelings of greater anticipated regret.
Extending the work of Tykocinski and Pittman (1998), we predicted that
receiving a second oer from a dierent source would reduce feelings of
anticipated regret. This eect may occur because the counterfactual alternative (i.e., the ®rst oer) may be less salient when the second oer is received
from a dierent source rather than the same source. That is, an individual
who accepts a second oer from a dierent source may be reminded less often
about ``what might have been'' than one who accepts a second oer from the
same source. We were interested in exploring the eect of domain on regret
but, given a lack of previous research, we did not advance any speci®c hypothesis for that manipulation.
2. Method
2.1. Participants
The participants were individuals enrolled in either an MBA or Administrative Science (M.A.) graduate program n 117. The participants averaged 32.6 years of age and 9.4 years of full time employment experience.
2.2. Materials and procedure
The participants read the paragraph length scenario presented in Appendix
A in which they imagined that they owned a small business which was the
subject of a buy-out oer from a big corporation. For some participants, the
source of the ®rst oer and second oer was the same big corporation,
whereas for other participants, the source of the ®rst oer was the big corporation, and the source of the second oer was a company in a nearby city.
Participants in the control group received a single oer that was equivalent to
228
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
the second oer received by participants in other conditions. The participants
were presented with either gain or loss versions of the scenario and completed
the study at the beginning of a class period. Thus, we employed a 3 (source:
same, dierent, control) 2 (domain: gain, loss) factorial design.
2.3. Measures
Participants responded to 4, 5-point Likert scaled items indicating their
likelihood of accepting the oer, satisfaction with the oer, anticipated
happiness if the oer was accepted, and anticipated regret if the oer was
accepted. The likelihood of accepting and satisfaction items were averaged to
form an oer appraisal scale (a 0:81), and the anticipated happiness (reverse scored) and anticipated regret items were averaged to form a regret
scale (a 0:84). Higher ratings indicated greater levels of the construct.
3. Results
As we predicted, there was a signi®cant, negative correlation between the
oer appraisal and anticipated regret measures (r ÿ0:71), some of which
may be attributed to common method variance. The results of a factor
analysis on the scale items, available from the ®rst author, showed that the
items tended to load on a single factor. Nevertheless, regret theory (Loomes
& Sugden, 1982) makes a distinction between the emotional responses that
accompany choice and the choice itself, and our measures were intended to
re¯ect this theoretical distinction. Thus, we conducted separate analyses of
variance (ANOVA) on the oer appraisal and anticipated regret measures.
We also calculated the eect size (eta squared, g2 ) associated with each of the
model terms. Descriptive statistics for all measures are presented in Table 1.
There was a signi®cant eect for domain on appraisal of the oer,
F 1; 111 43:11; p < 0:001; g2 0:280. Gains were appraised more highly
(M 3:02; S:D: 1:06) than losses (M 1:96; S:D: 0:68). The eect for
domain functions as a manipulation check, showing that the gain-domain
scenario was more positively received than the loss-domain scenario. The
main eect for source on appraisal of the oer was not signi®cant,
F 2; 111 0:28; p 0:755; g2 0:005. However, the interaction among
source and domain was marginally signi®cant, F 2; 111 2:89; p
0:060; g2 0:049. Given the lack of power aorded by the size of our sample
and an eect size near 5%, we went ahead and conducted Tukey-HSD post
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
229
Table 1
Means and standard deviations for dependent measuresA
Condition
n
Gain/No inaction
M
S.D.
17
Gain/Inaction ± same source
M
S.D.
21
Gain/Inaction ± dierent source
M
S.D.
21
Loss/No inaction
M
S.D.
19
Loss/Inaction ± same source
M
S.D.
20
Loss/Inaction ± dierent source
M
S.D.
19
Appraisal
Regret
3:32a
1.09
2:29a
0.73
2:91ac
1.16
2:81a
0.97
2:88ac
0.93
2:81a
0.97
1:71b
0.35
3.97b
0.66
1:93b
0.67
3:93b
0.80
2:24c
1.04
3.67b
0.77
A
Pairs of means within a column not sharing a superscript are signi®cantly dierent (Tukey-HSD post hoc
comparisons).
hoc tests to explore the nature of the interaction. As can be seen in Table 1,
appraisals of gains became more negative when a second oer was received
from either source, but appraisals of loss became more positive with the
receipt of a second oer. However, there were no signi®cant dierences across
source conditions within each domain. Testing for dierences across domain
showed that gains were appraised more highly than losses when there was no
inaction and when a second oer was received from the same source as the
®rst. However, when the second oer came from a dierent source, there was
no dierence in appraisals of gains and losses.
There was a signi®cant eect from domain on anticipated regret,
F 1; 111 52:61; p < 0:001; g2 0:360. Again, the eect demonstrates that
our manipulation was successful, as gains were associated with less anticipated regret than losses (M 2:66; S:D: 0:92 vs. M 3:85; S:D: 0:74).
The main eect for source on regret was not signi®cant, F 2; 111 0:77;
p 0:466; g2 0:014. However, the interaction among source and domain
approached conventional levels of signi®cance, F 2; 111 2:45; p 0:091;
230
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
g2 0:042. Again, given our lack of statistical power and the size of the
interaction eect, we conducted Tukey-HSD post hoc tests to explore the
interaction. Although regret increased slightly for gains when there was a
second oer from either source and decreased slightly for losses when the
second oer came from a dierent source (see Table 1), in fact, there were no
signi®cant dierences across source within each domain. In addition, losses
were associated with more regret than gains for every source condition.
4. Discussion
The purpose of this study was to examine inaction inertia in the domain of
losses as well as gains and to examine the eect of oer source on the inaction
inertia eect. We found that the eect of prior inaction may operate dierently in the domain of losses than in the domain of gains. As would be expected, the likelihood of accepting a loss was low regardless of whether an
initial opportunity was foregone or whether the source of the second oer
was the same or dierent. However, the trends for accepting gains and losses
were divergent. Though we observed a trend consistent with the inaction
inertia eect for gains regardless of whether the source of the second oer was
the same or dierent, we observed an opposite trend for losses, such that
participants were slightly more likely to accept a second oer, particularly
when it can from a dierent source.
Although we hypothesized that decision makers may be less likely to use
the ®rst oer as a reference point when the second oer came from a dierent
source, our results were only consistent with that explanation in the domain
of losses; the inaction inertia eect was not in¯uenced by oer source in the
domain of gains. It is possible that the eect in the domain of losses arises
from the social information that a second source provides. Speci®cally, a less
attractive oer from a second source may provide converging evidence about
market price trends. Thus, when the oers are getting worse and seem unlikely to get better, individuals may ``cut their losses'' and be more likely to
take action. As this is the ®rst study to examine the eects of prior inaction in
the domain of losses, more research is needed to determine what factors
in¯uence decisions to act on losses.
We also directly measured anticipated regret and, consistent with prior
research (Tykocinski & Pittman, 1998), found some support for the hypothesis that anticipated regret may explain inaction inertia. There is a
strong, negative correlation between anticipated regret and appraisal of the
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
231
oer. This suggests that as anticipated regret increases, inaction inertia is also
likely to occur. Tykocinski and Pittman (1998) note that it is not clear
whether inaction inertia is a response to avoid anticipated regret or to escape
present feelings of regret. Given that our study speci®cally measured anticipated regret, it appears that at least some of the inaction inertia eect is due
to the avoidance of projected emotional responses. More research is necessary, however, to determine the role of regret avoidance and escape responses
in producing inaction inertia.
Although the inaction inertia eect is an interesting decision phenomenon,
the practical importance of the eect is unclear. Limits to the eect have
already been identi®ed: Tykocinski et al. (1995) and Tykocinski and Pittman
(1998) only found the eect when the dierence between the prior and present
oers was large. The present study suggests other factors may also limit the
eect. We found a relatively weak inaction inertia eect for a business vignette with experienced business decision makers as participants. It may well
be the case that experienced decision makers consider more information, like
the opportunity for future gains, and are therefore less likely to show inaction
inertia (cf., Smith & Kida, 1991). It is important to remember that this and
previous studies of inaction inertia have all been laboratory investigations
employing simple vignettes or simulations. Outside of the laboratory, decisions to act are made in a considerably richer context, and many factors will
likely in¯uence whether or not action is taken. Our study suggests that social
information may be one such factor. Clearly, however, future research should
attempt to uncover other predictors of inaction.
Acknowledgements
We are grateful for Amie Skattebo's assistance with data collection and for
the comments of an anonymous reviewer.
Appendix A. Business vignettes
A.1. Inaction scenario
Imagine you are an independent contractor with your own small business.
You have been approached by a big corporation about buying out your small
business. The big corporation indicated that, if you signed their contract by
the 15th of October, they would buy you out for $1 million. Your small
232
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
business has an estimated worth of $600,000 [$1,400,000]. Although this
sounded like an attractive oer, you could not get the necessary legal work in
order by October 15th. Later, the big corporation [a company in a similar
line of business operating in a nearby city] approached you again and indicated that, although you missed the deadline, they would oer you $850,000
for your small business. How likely would you be to accept their oer?
A.2. Control scenario
Imagine you are an independent contractor with your own small business.
You have been approached by a big corporation about buying out your small
business. The big corporation said that, if you signed their contract by the
15th of October, they would buy you out for $850,000. Your small business
has an estimated worth of $600,000 [$1,400,000]. How likely would you be to
accept their oer?
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Meeting of the Society for Judgment and Decision Making, Philadelphia.
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uncertainly. Economic Journal, 92, 805±824.
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6, 577±587.
Tykocinski, O. E., & Pittman, T. S. (1998). The consequences of doing nothing: Inaction inertia as avoidance
of anticipated counterfactual regret. Journal of Personality and Social Psychology, 75, 607±616.
Tykocinski, O. E., Pittman, T. S., & Tuttle, E. E. (1995). Inaction inertia: Foregoing future bene®ts as a
result of an initial failure to act. Journal of Personality and Social Psychology, 68, 793±803.
Zeelenberg, M. (1999). Anticipated regret, expected feedback, and behavioral decision making. Journal of
Behavioral Decision Making, 12, 93±106.
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Apologizing for interpersonal regrets involving actions or inactions. Personality and Social Psychology
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Zeelenberg, M., Beattie, J., van der Pligt, J., & de Vries, N. K. (1996). Consequences of regret aversion:
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Processes 65, 148±158.
www.elsevier.com/locate/joep
Deciding to sell: The eect of prior inaction and oer source
Adam Butler
a
a,*
, Scott Highhouse
b
Department of Public and Environmental Aairs, University of Wisconsin-Green Bay, USA
b
Department of Psychology, Bowling Green State University, USA
Received 6 July 1998; received in revised form 16 June 1999; accepted 3 November 1999
Abstract
Recent research has shown that decision makers are less likely to accept an opportunity
after failing to act on a previous oer, an eect labeled inaction inertia. We extended the
original research by examining the phenomenon in the domain of losses as well as in the
domain of gains. A pattern consistent with the inaction inertia eect was found for gains but
not for losses. We also manipulated the source of the second oer and found that evaluations
of gains decreased after inaction regardless of source, but evaluations of losses increased when
the second oer came from a dierent source. Evaluations of the oer were highly correlated
with ratings of anticipated regret, suggesting that the avoidance of negative emotions may be
partially responsible for the eect. Ó 2000 Elsevier Science B.V. All rights reserved.
PsycINFO classi®cation: 3660; 3020; 3920
JEL classi®cation: D23; E49
Keywords: Inaction inertia; Regret; Decision making persistence
*
Corresponding author. Present address: Department of Psychology, University of Northern Iowa,
Cedar Falls, IA 50614-0505, USA. Tel.: +1-319-273-7293; fax: +1-319-273-6188.
E-mail address: [email protected] (A. Butler).
0167-4870/00/$ - see front matter Ó 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 1 6 7 - 4 8 7 0 ( 0 0 ) 0 0 0 0 2 - 7
224
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
1. Introduction
The tendency to persist in a state of action is a well-known phenomenon in
psychology. Research on compliance, for instance, demonstrates that an
initial action can induce commitment to a subsequent action undertaken at a
higher cost (Beaman, Cole, Preston, Klentz & Steblay, 1983). Research on
decision making shows that individuals who sustain a loss as a result of their
action escalate their commitment to the course of action (Staw, 1981). Recently, Tykocinski, Pittman and Tuttle (1995) found a similar eect operating
in cases of inaction. That is, when individuals failed to act on a decision
opportunity, they were likely to persist in the course of inaction when confronted with a subsequent decision, an eect labeled ``inaction inertia''.
In their original studies of inaction inertia, Tykocinski et al. (1995) found
that participants who failed to act on an initial opportunity were less likely to
act on a second, somewhat less desirable opportunity compared to participants who did not experience inaction. In one of their vignettes, participants
were given the opportunity to enroll in a frequent ¯ier program which would
earn a free ticket with the accumulation of 20,000 miles. Participants were
told that if they joined the program, they would earn 5500 miles. In the prior
inaction condition, participants were told that they passed on the opportunity to join the program earlier in the year which would have earned them
10,000 miles. Inaction inertia was demonstrated when participants in the
prior inaction condition were signi®cantly less likely to join the program than
participants with no prior inaction. The authors replicated the inaction inertia eect in monetary and non-monetary scenarios and also behaviorally in
a gambling decision.
1.1. Theoretical explanations of inaction inertia
Two explanations have been proposed for the inaction inertia eect. The
cognitive explanation is that the eect arises from an anomaly in mental
accounting. In the frequent ¯ier vignette, participants in both the inaction
and no inaction conditions stand to gain the same amount (i.e., 5500 miles).
However, in the context of a failure to act on a more attractive opportunity
(i.e., 10,000 miles), the less attractive opportunity may be perceived as a loss
rather than a gain (i.e., a loss of 4500 miles). That is, participants appear to
use the foregone gain as a reference point from which to evaluate the second
opportunity.
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
225
Tykocinski et al. (1995) tested the mental accounting explanation by manipulating the salience of the future gain or foregone opportunity. Attention
was focussed on future gains by telling participants that they could still earn
free miles by accepting the oer. Attention was focused on foregone bene®ts
by telling participants that they lost free miles by not accepting the initial
oer. A third group of participants did not receive any framing manipulation.
Tykocinski et al. found that participants in the loss frame and control conditions were less likely to accept the second opportunity than participants
who received a gain frame. Thus, in the absence of any framing information,
the second opportunity may automatically be perceived as a loss.
An alternative, motivationally based explanation is that inaction inertia
represents an attempt to avoid the emotional experience of regret. Regret
theory assumes that decision makers compare actual outcomes to other,
foregone outcomes and feel regret if the foregone outcome is superior to the
actual (Loomes & Sugden, 1982). The theory further assumes that emotions
are anticipated prior to choice and that they in¯uence decisions. Numerous
studies indicate that decision makers make choices that minimize anticipated
regret (Zeelenberg, 1999; Zeelenberg, Beattie, Pligt & Vries, 1996).
The experience of regret is based on imagined alternative outcomes, and
one factor which in¯uences the imagination of alternatives is whether the
actual outcome resulted from action or inaction. Research demonstrates that,
in the short term, action is regretted more than inaction because it is much
easier to imagine counterfactual alternatives after an action (Gilovich &
Medvec, 1995; Kahneman & Miller, 1986; Zeelenberg, van der Pligt &
Manstead, 1998). For example, a person who decides to enroll in the frequent
¯ier program after failing to enroll earlier is more likely to be plagued by ``if
only'' type thoughts than one who never enrolls. By not acting, the decision
maker reduces the possibility of imagining what might have been and thereby
minimizes the negative emotional experience of regret (Tykocinski & Pittman, 1998).
Tykocinski and Pittman (1998) reasoned that making the counterfactual,
foregone opportunity dicult to avoid would decrease inaction inertia because inaction would no longer be an eective strategy to minimize regret. In
four studies, they found that when avoidance of the foregone opportunity
was impossible, costly, or unnecessary, the likelihood of acting on the second
opportunity increased. When asked to provide reasons for their decisions,
participants were most likely to list thoughts suggesting regret when avoidance of the foregone opportunity was possible. A similar study by Hutzel and
Arkes (1997) found that regret and inaction inertia were more likely when an
226
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
initial, foregone purchasing opportunity was geographically closer and,
therefore, more dicult to avoid.
These studies suggest that inaction is a strategy that allows decision
makers to avoid the missed opportunity and, in eect, reduce the experience
of counterfactual regret.
1.2. The present study
We sought to extend the original research by Tykocinski and his colleagues
(Tykocinski et al., 1995; Tykocinski & Pittman, 1998) in several ways. First,
we examined whether inaction inertia occurs in the domain of losses as well
as gains. Although participants in the Tykocinski et al. (1995) studies appeared to frame outcomes as losses, they were nevertheless faced with absolute gains in all of the experimental conditions. It is unclear whether this
phenomenon occurs when people are facing clear losses or are in the loss
domain. Consider, for example, a situation in which a stock holder learns
that her stock has declined in value one dollar per share. Instead of selling,
the stockholder decides to hold ®rm, only to ®nd that the stock has declined
another dollar the following day. Would this person be less likely to sell the
stock than one who learns that his stock has declined two dollars per share?
The answer to this question is not straightforward. On the one hand, we
might expect that the second stock holder perceives a two dollar loss per
share, whereas the ®rst may perceive both the overall loss plus a one dollar
loss from the previous day. This would likely result in the inaction inertia
found by Tykocinski et al. (1995). On the other hand, one might argue that
the stock holder who passed on the initial opportunity to sell shifted her
reference point down to minus one dollar. In the same way that an absolute
gain is perceived as a relative loss after a more attractive missed gain, an
absolute loss might be perceived as relatively smaller following a previous
loss. Thus, the second loss in the example would be perceived as only an
incremental loss of one dollar (compared to the two dollar loss experienced
by the second stock holder). This might result in no inaction inertia for the
®rst stock holder.
A second way in which we sought to extend the original research on inaction inertia was by changing the source of the second oer. In each of the
previous experiments on the phenomenon, the ®rst and second oers have
come from the same source or involved two dierent commodities. According
to the mental accounting explanation, people who fail to act on a previous
opportunity will shift their reference point to the ®rst oer in evaluating
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
227
subsequent oers. One might expect that presenting the second oer as
coming from a dierent source would weaken the eect. That is, participants
should be less likely to use the ®rst oer as a reference point when it came
from a dierent source than the second oer.
In addition to examining evaluations of the oer, we also examined anticipated regret. Tykocinski and Pittman (1998) measured regret in one of
their four studies using a thought listing procedure. In the present study, we
developed a scale to directly measure anticipated regret. As a replication of
Tykocinski and Pittman (1998), we predicted that inaction inertia (i.e., lower
evaluations) would be associated with feelings of greater anticipated regret.
Extending the work of Tykocinski and Pittman (1998), we predicted that
receiving a second oer from a dierent source would reduce feelings of
anticipated regret. This eect may occur because the counterfactual alternative (i.e., the ®rst oer) may be less salient when the second oer is received
from a dierent source rather than the same source. That is, an individual
who accepts a second oer from a dierent source may be reminded less often
about ``what might have been'' than one who accepts a second oer from the
same source. We were interested in exploring the eect of domain on regret
but, given a lack of previous research, we did not advance any speci®c hypothesis for that manipulation.
2. Method
2.1. Participants
The participants were individuals enrolled in either an MBA or Administrative Science (M.A.) graduate program n 117. The participants averaged 32.6 years of age and 9.4 years of full time employment experience.
2.2. Materials and procedure
The participants read the paragraph length scenario presented in Appendix
A in which they imagined that they owned a small business which was the
subject of a buy-out oer from a big corporation. For some participants, the
source of the ®rst oer and second oer was the same big corporation,
whereas for other participants, the source of the ®rst oer was the big corporation, and the source of the second oer was a company in a nearby city.
Participants in the control group received a single oer that was equivalent to
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A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
the second oer received by participants in other conditions. The participants
were presented with either gain or loss versions of the scenario and completed
the study at the beginning of a class period. Thus, we employed a 3 (source:
same, dierent, control) 2 (domain: gain, loss) factorial design.
2.3. Measures
Participants responded to 4, 5-point Likert scaled items indicating their
likelihood of accepting the oer, satisfaction with the oer, anticipated
happiness if the oer was accepted, and anticipated regret if the oer was
accepted. The likelihood of accepting and satisfaction items were averaged to
form an oer appraisal scale (a 0:81), and the anticipated happiness (reverse scored) and anticipated regret items were averaged to form a regret
scale (a 0:84). Higher ratings indicated greater levels of the construct.
3. Results
As we predicted, there was a signi®cant, negative correlation between the
oer appraisal and anticipated regret measures (r ÿ0:71), some of which
may be attributed to common method variance. The results of a factor
analysis on the scale items, available from the ®rst author, showed that the
items tended to load on a single factor. Nevertheless, regret theory (Loomes
& Sugden, 1982) makes a distinction between the emotional responses that
accompany choice and the choice itself, and our measures were intended to
re¯ect this theoretical distinction. Thus, we conducted separate analyses of
variance (ANOVA) on the oer appraisal and anticipated regret measures.
We also calculated the eect size (eta squared, g2 ) associated with each of the
model terms. Descriptive statistics for all measures are presented in Table 1.
There was a signi®cant eect for domain on appraisal of the oer,
F 1; 111 43:11; p < 0:001; g2 0:280. Gains were appraised more highly
(M 3:02; S:D: 1:06) than losses (M 1:96; S:D: 0:68). The eect for
domain functions as a manipulation check, showing that the gain-domain
scenario was more positively received than the loss-domain scenario. The
main eect for source on appraisal of the oer was not signi®cant,
F 2; 111 0:28; p 0:755; g2 0:005. However, the interaction among
source and domain was marginally signi®cant, F 2; 111 2:89; p
0:060; g2 0:049. Given the lack of power aorded by the size of our sample
and an eect size near 5%, we went ahead and conducted Tukey-HSD post
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
229
Table 1
Means and standard deviations for dependent measuresA
Condition
n
Gain/No inaction
M
S.D.
17
Gain/Inaction ± same source
M
S.D.
21
Gain/Inaction ± dierent source
M
S.D.
21
Loss/No inaction
M
S.D.
19
Loss/Inaction ± same source
M
S.D.
20
Loss/Inaction ± dierent source
M
S.D.
19
Appraisal
Regret
3:32a
1.09
2:29a
0.73
2:91ac
1.16
2:81a
0.97
2:88ac
0.93
2:81a
0.97
1:71b
0.35
3.97b
0.66
1:93b
0.67
3:93b
0.80
2:24c
1.04
3.67b
0.77
A
Pairs of means within a column not sharing a superscript are signi®cantly dierent (Tukey-HSD post hoc
comparisons).
hoc tests to explore the nature of the interaction. As can be seen in Table 1,
appraisals of gains became more negative when a second oer was received
from either source, but appraisals of loss became more positive with the
receipt of a second oer. However, there were no signi®cant dierences across
source conditions within each domain. Testing for dierences across domain
showed that gains were appraised more highly than losses when there was no
inaction and when a second oer was received from the same source as the
®rst. However, when the second oer came from a dierent source, there was
no dierence in appraisals of gains and losses.
There was a signi®cant eect from domain on anticipated regret,
F 1; 111 52:61; p < 0:001; g2 0:360. Again, the eect demonstrates that
our manipulation was successful, as gains were associated with less anticipated regret than losses (M 2:66; S:D: 0:92 vs. M 3:85; S:D: 0:74).
The main eect for source on regret was not signi®cant, F 2; 111 0:77;
p 0:466; g2 0:014. However, the interaction among source and domain
approached conventional levels of signi®cance, F 2; 111 2:45; p 0:091;
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A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
g2 0:042. Again, given our lack of statistical power and the size of the
interaction eect, we conducted Tukey-HSD post hoc tests to explore the
interaction. Although regret increased slightly for gains when there was a
second oer from either source and decreased slightly for losses when the
second oer came from a dierent source (see Table 1), in fact, there were no
signi®cant dierences across source within each domain. In addition, losses
were associated with more regret than gains for every source condition.
4. Discussion
The purpose of this study was to examine inaction inertia in the domain of
losses as well as gains and to examine the eect of oer source on the inaction
inertia eect. We found that the eect of prior inaction may operate dierently in the domain of losses than in the domain of gains. As would be expected, the likelihood of accepting a loss was low regardless of whether an
initial opportunity was foregone or whether the source of the second oer
was the same or dierent. However, the trends for accepting gains and losses
were divergent. Though we observed a trend consistent with the inaction
inertia eect for gains regardless of whether the source of the second oer was
the same or dierent, we observed an opposite trend for losses, such that
participants were slightly more likely to accept a second oer, particularly
when it can from a dierent source.
Although we hypothesized that decision makers may be less likely to use
the ®rst oer as a reference point when the second oer came from a dierent
source, our results were only consistent with that explanation in the domain
of losses; the inaction inertia eect was not in¯uenced by oer source in the
domain of gains. It is possible that the eect in the domain of losses arises
from the social information that a second source provides. Speci®cally, a less
attractive oer from a second source may provide converging evidence about
market price trends. Thus, when the oers are getting worse and seem unlikely to get better, individuals may ``cut their losses'' and be more likely to
take action. As this is the ®rst study to examine the eects of prior inaction in
the domain of losses, more research is needed to determine what factors
in¯uence decisions to act on losses.
We also directly measured anticipated regret and, consistent with prior
research (Tykocinski & Pittman, 1998), found some support for the hypothesis that anticipated regret may explain inaction inertia. There is a
strong, negative correlation between anticipated regret and appraisal of the
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
231
oer. This suggests that as anticipated regret increases, inaction inertia is also
likely to occur. Tykocinski and Pittman (1998) note that it is not clear
whether inaction inertia is a response to avoid anticipated regret or to escape
present feelings of regret. Given that our study speci®cally measured anticipated regret, it appears that at least some of the inaction inertia eect is due
to the avoidance of projected emotional responses. More research is necessary, however, to determine the role of regret avoidance and escape responses
in producing inaction inertia.
Although the inaction inertia eect is an interesting decision phenomenon,
the practical importance of the eect is unclear. Limits to the eect have
already been identi®ed: Tykocinski et al. (1995) and Tykocinski and Pittman
(1998) only found the eect when the dierence between the prior and present
oers was large. The present study suggests other factors may also limit the
eect. We found a relatively weak inaction inertia eect for a business vignette with experienced business decision makers as participants. It may well
be the case that experienced decision makers consider more information, like
the opportunity for future gains, and are therefore less likely to show inaction
inertia (cf., Smith & Kida, 1991). It is important to remember that this and
previous studies of inaction inertia have all been laboratory investigations
employing simple vignettes or simulations. Outside of the laboratory, decisions to act are made in a considerably richer context, and many factors will
likely in¯uence whether or not action is taken. Our study suggests that social
information may be one such factor. Clearly, however, future research should
attempt to uncover other predictors of inaction.
Acknowledgements
We are grateful for Amie Skattebo's assistance with data collection and for
the comments of an anonymous reviewer.
Appendix A. Business vignettes
A.1. Inaction scenario
Imagine you are an independent contractor with your own small business.
You have been approached by a big corporation about buying out your small
business. The big corporation indicated that, if you signed their contract by
the 15th of October, they would buy you out for $1 million. Your small
232
A. Butler, S. Highhouse / Journal of Economic Psychology 21 (2000) 223±232
business has an estimated worth of $600,000 [$1,400,000]. Although this
sounded like an attractive oer, you could not get the necessary legal work in
order by October 15th. Later, the big corporation [a company in a similar
line of business operating in a nearby city] approached you again and indicated that, although you missed the deadline, they would oer you $850,000
for your small business. How likely would you be to accept their oer?
A.2. Control scenario
Imagine you are an independent contractor with your own small business.
You have been approached by a big corporation about buying out your small
business. The big corporation said that, if you signed their contract by the
15th of October, they would buy you out for $850,000. Your small business
has an estimated worth of $600,000 [$1,400,000]. How likely would you be to
accept their oer?
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