Regret Aversion Bias
🧠Psych - 173/200
Hello,
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For today, I am writing about another bias called Regret Aversion.
What is it?
This bias seeks to avoid the emotional pain of regret associated with poor decision making. People who are regret averse try to avoid distress arising from errors of commission and errors of omission.
Regret aversion causes investors to anticipate and fear the pain of regret that comes with incurring a loss or forfeiting a profit.
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What do I need to know?
Regret aversion need not always be negative. In some cases, these biases may help investors from making wrong decisions.
For example, if a buyer has already lost money by investing in an overheated market, the regret aversion will prevent them from investing in peaking markets the next time. This might actually help them avoid some losses. [2]
References & Studies: -
https://onlinelibrary.wiley.com/doi/10.1002/9781119202400.ch22
https://www.managementstudyguide.com/regret-aversion-bias.htm
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