Limits on Regret as a Tool for Incentive Design

Felipe Araujo, Alex Imas and Alistair Wilson

No 32759, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We demonstrate the pitfalls when extrapolating behavioral findings across different contexts and decision environments. We focus on regret theory and the use of “regret lotteries” for motivating behavior change. Here, findings from one-shot settings have been used to promote regret as a tool to boost incentives in recurrent decisions across many settings. Using theory and experiments, we replicate regret lotteries as the superior one-shot incentive; however, for repeated decisions the comparative static is entirely reversed. Moreover, the effects are extremely sensitive to details of regret implementation. Our results suggest caution should be used when designing incentive schemes that exploit regret.

JEL-codes: D0 D03 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-cbe, nep-des, nep-exp, nep-nud and nep-upt
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