Ignorance is Bliss: A Game of Regret

TL;DR

This paper models regret as a multi-player game where individuals' knowledge about unchosen options depends on others' choices, revealing complex coordination dynamics and multiple equilibria, supported by experimental evidence.

Contribution

It introduces a novel regret game framework linking individual regret to others' choices, highlighting interconnected decision-making and multiple equilibria.

Findings

Regret information depends on others' choices.

The regret game has multiple equilibria.

Experimental results support the model's predictions.

Abstract

An individual can only experience regret if she learns about an unchosen alternative. In many situations, learning about an unchosen alternative is possible only if someone else chose it. We develop a model where the ex-post information available to each regret averse individual depends both on their own choice and on the choices of others, as others can reveal ex-post information about what might have been. This implies that what appears to be a series of isolated single-person decision problems is in fact a rich multi-player behavioural game, the regret game, where the psychological payoffs that depend on ex-post information are interconnected. For an open set of parameters, the regret game is a coordination game with multiple equilibria, despite the fact that all individuals possess a uniquely optimal choice in isolation. We experimentally test this prediction and find support for it.