Jack is a sales manager of an electronic equipment manufacturer. He is currently examining several potential distributors that will assist his company in distributing its high-tech industrial machinery. After narrowing the search, Jack considers three companies (Alpha, Beta and Gamma), and decides to cooperate with company Alpha, mainly because of his expectations that it will provide a higher sales growth rate than the others (Alpha is expected to increase by 6% within the next year). A year later, Alpha’s sales growth rate is 3%, while the sales growth rate of Beta is 12% and Gamma decreased 4% (both of them were hired by two competitors). How does Jack now feel about his decision to cooperate with Alpha? Does he feel regret because he compares his actual outcome (a 3% gain) to the outcome that would have been obtained if he had cooperated with Beta (a 12% gain). Or does he feel rejoicing (the opposite of regret), stemming from a comparison with the outcome that would have been had he cooperated with Gamma (a 4% loss)? Jack’s postdecisional feelings may in addition be influenced by another possible reference point, namely, the a priori expected sales growth rate (a 6% gain). How do these three possible reference points influence regret? Which of these reference points has the largest impact on regret? Is regret driven mainly by a loss or gain relative to each reference point or by the magnitude of that loss or gain?

Reference points are important because outcomes are compared to them, and are coded and evaluated in terms of this comparison (Kahneman, 1992). The concept of reference points was introduced in prospect theory (Kahneman & Tversky, 1979). According to prospect theory, decision makers adopt a reference point, a point that may represent an available option. Decision makers then evaluate their outcomes relative to this point. Outcomes below the reference point are viewed as losses, and outcomes above the reference point are perceived as gains. The importance of such reference points has been highlighted by regret theory (e.g., Bell, 1982; Loomes & Sugden, 1982), which has shown that the foregone alternative or target becomes the reference point against which regret is computed. When an obtained outcome compares unfavorable with an outcome that was possible had we chosen differently, regret is evoked. Conversely, if a different choice would have led to a worse outcome, people are pleased (Van Dijk & Zeelenberg, 2005).

In real life, however, multiple alternatives exist. Thus, the decision makers may simultaneously face reference points that are above, at, or below the focal option. If two or more alternatives are unchosen, which one will become the comparison standard for measuring regret? At present, we know little about the simultaneous impact of multiple reference points on regret. Although some scholars have recognized that decision makers may use multiple reference points in decision making and in judgments of postdecisional regret (Bell, 1982; Inman, Dyer, & Jia, 1997; Oliver, 1996), Frederick and Loewenstein (1999) recently pointed out that the information of multiple reference points and their relative weighting has not been investigated empirically.

To develop a clear understanding of how postdecisional regret is influenced by multiple reference points, over three hundred sales managers were surveyed, and asked to reflect on their managerial decisions. Their regrets are of particular interest because of the different reference points that are naturally associated with managerial decisions to cooperate with distributors. It is believed that this experimental field study will meaningfully mirror how a sales manager makes comparisons among multiple reference points.

In everyday life, we are constantly surrounded by information about other people − their performances, possessions, appearance, and so on. People compare themselves with other people − either upward (i.e., with those who are better off) or downward (i.e., with those who are worse off). These social comparisons are pivotal to individuals’ self-evaluations (see Collins, 1996 for review). Previous research has shown that these social comparisons exert powerful effects on our lives and well-being (Bègue, 2005; Festinger, 1954).

To the extent that individuals have positive illusions about their own abilities and future prospects, they will see greater parallels between themselves and those successful, rather than those similar or unsuccessful (Buunk & Ybema, 1997). Others who are better off thus provide more information about what one is, what one should be, or what one will likely become in the future (Lockwood, 2002). Consider, for example, a sales manager Jack, who knows the performance of his company’s competitor and thinks, “If only I had selected the best-performing distributor of Beta, our annual sales performance could have been better”. By simulating routes to imagined better realities, managers may be able to improve on the outcomes in the future (Roese, 1994). For example, a manager may learn to replace the present distributor to reduce losses, or prompt himself/herself to make a more detailed distribution policy the next time. On the negative side, however, thinking about how much better a prior decision could have gone may devalue the obtained outcome and lead to postdecisional regret (Loomes & Sugden, 1982). Hence, the following hypothesis was proposed:
H1: In the context of a choice set comprising three alternatives, the best-performing unchosen alternatives will serve as a reference point to influence managers’ postdecisional regret.

Under certain conditions, however, the experience of an inferior other may become more relevant to the self. In his influential downward comparison theory, Wills (1981) emphasized that in situations that imply a decrease in well-being, individuals do indeed tend to compare themselves with others who are worse off, particularly when instrumental action is not possible. A series of survey studies have shown that individuals faced with threats such as an experience of failure (Swallow & Kuiper, 1993), or a serious smoking problem (Gibbons, Gerrard, Lando, & McGovern, 1991) reported a preference for comparisons to less fortunate others. This is evident in the example of a sales manager who receives a 3% sales increase in his chosen distributor and thinks, “At least we did not lose money.” Such a downward comparison may make managers feel better; in comparison to the competitor’s -4%, a 3% increase seems pretty good. The primary motive for this behavior is believed to be self-enhancement or improvement of subjective well-being; in fact, such comparisons have been shown to produce an amelioration of negative mood (Gibbons & Gerrard, 1991). Based on these discussions, the following hypothesis was proposed:
H2: In the context of a choice set comprising three alternatives, the worst-performing unchosen alternative will serve as one of the reference points to influence managers’ postdecisional regret.

Previous research has documented the impact of self-derived expectations as reference points in the evaluation of outcomes (e.g., Oliver, 1996; Ordóñez, Connolly, & Coughlan, 2000). Bridges (1993), for example, indicated that consumers’ expectations regarding a product or service they would select for a particular situation may determine a reference point that impacts how they judge products or services they use in that situation. Similarly, Oliver suggested that individuals use expectation as a basis for comparing performance outcomes. If an outcome does not match up to their expectation, people feel disappointment (Bell, 1985; Inman et al., 1997; Loomes & Sugden, 1987). A question investigated in the present manuscript was, “Is managers’ regret also evoked when the outcomes fail to meet their expectations?” We have reason to believe that this is the case, not only on the basis of the research referred to above, but also on the basis of the findings of Sanna and Turley (1996) that unexpected outcomes evoke greater counterfactual activation. Managers typically have positive expectations about future sales of their distribution decisions. When the outcomes fail to meet their expectations, managers may think, “If only I had had more detailed distributor background information, I would have selected a more appropriate distributor and thus obtained as much as I expected.” When such counterfactual thoughts are generated after comparing obtained outcomes with expectations, managers may suffer negative feelings of regret. Therefore, the hypothesis was formed that:
H3: Expectations serve as a reference point in managers’ judgments of postdecisional regret.

In addition, we predicted that the best-performing unchosen alternative may be the most influential reference point, because ample research has shown that in general, individuals favor upward social comparison information over downward comparison information (Bunnk, 1995); temporal comparison processes are generally secondary to social comparison (Ordóñez et al., 2000; Suls & Mullen, 1984). The best-performing unchosen alternative thus appears to be the most useful source of managers’ subsequent evaluations of managerial outcomes.
H4: Among these reference points, the best-performing unchosen alternative will have the largest impact on regret.

Finally, we expected to find that managers’ regret is mainly driven by a loss or gain between the obtained outcome and each reference point rather than by the degree of loss or gain between them. This is consistent with the findings of Mellers, Schwartz, and Ritov (1999, p. 339) that “the regret function is sensitive to the sign of the difference between outcomes but not to the magnitude of the difference.” We propose that similar effects can occur simultaneously for multiple reference points.
H5: Regret is mainly driven by a loss or gain between the obtained outcome and each reference point rather than by the magnitude of loss or gain between them.

A national sample of 1,500 sales managers representing manufacturing firms in Taiwan was randomly selected from the internal databases of a commercial mailing list company. An introductory letter was mailed to all sample members. Their participation in the study was requested, the intent of the investigation was explained, and managers were informed that a survey could be expected in the mail the following week. Then, a packet containing a cover letter, the survey, and a preaddressed, postage-paid reply envelope was mailed to all sample members. After 1 week had elapsed, a follow-up letter was mailed reminding survey respondents to complete and return the survey within the prespecified time period.

The goal of this research was to examine how multiple reference points influence the regret that managers feel with respect to their decisions. The reference points that were used to evaluate the outcomes of the chosen options were the outcomes of each of the unchosen companies and the expected outcome of the chosen company. We used a multiple reference points regression model to investigate the impact of these potential reference points (following the strategy that was used by Ordóñez et al., 2000):

Regret = β₁D_best + β₂D_worst + β₃D_expectation + β₄PosBest + β₅NegBest +
β₆PosWorst + β₇NegWorst + β₈PosExpectation + β₉NegExpectation (1)

where Regret is the average of the two regret items, and D_best, D_worst, and D_expectation, are dummies that represent whether the obtained outcome is better or worse than each reference point. These dummies are set to one when the obtained outcome is higher than the best-performing unchosen alternative, higher than the worst-performing unchosen alternative, and higher than the expectation. When the obtained outcome is lower than a reference point, the dummy is set to zero. PosBest, PosWorst, and PosExpectation, are the performance differences when the obtained outcomes are higher than the other reference points; the value is zero otherwise. NegBest, NegWorst, and NegExpectation are the performance differences when the obtained outcomes are lower than the other reference points; otherwise, zero.

The results for the regression analyses are reported in Table 3. In Model 1, all three dummy variables were significantly associated with postdecisional regret (adjusted R² = .245, F = 41.026, p < .001). These variables included the D_best (β = -.243, p < .001), D_worst (β = -.236, p < .001), and D_expectation (β = -.277, p < .001). These findings thus revealed that sales managers used three reference points: the best-performing unchosen alternative (upward comparison), the worst-performing unchosen alternative (downward comparison), and expectation to access his or her postdecisional regret. Thus, the hypotheses H1, H2, and H3 were supported.

In addition, a direct test of the differences between the significant βs (D_best vs. D_worst vs. D_expectation) in Model 1 was performed. The relevant test showed that managers’ regrets were not most influenced by the best-performing unchosen alternative (D_worst). The regression weight for D_best was not significantly higher than those for the worst-performing unchosen alternative and for the expected outcome (D_expectation) (ps > .05). These findings evidenced that managers equally favored social comparison information and temporal standards when assessing their postdecisional regrets. Thus, hypothesis H4 was not supported.

In Model 2 (see Table 3), when the positive and negative performance differences between the obtained outcome and each reference point were entered, we did not find a significant increase in the prediction of regret (adjusted R² change and F change, p = .21). Adding more and more precise predictors (PosBest, NegBest, PosWorst, NegWorst, PosExpectation, and NegExpectation) did not improve the model fit, causing us to conclude that Model 1 was the best- fitting and more parsimonious of the two models. Put differently, the regret of sales managers was mainly driven by a loss or gain relative to each reference point (D_best, D_worst, and D_expectation), rather than by the magnitude of that loss or gain (PosBest, NegBest, PosWorst, NegWorst, PosExpectation, NegExpectation). Thus, hypothesis H5 was supported.

Managers may feel regret when they compare the outcome of their managerial decisions with possible outcomes had they acted differently. Across this experimental field study, responses of sales managers provided strong evidence that decision makers use multiple reference points in judging their regrets. These important reference points include the best-performing unchosen alternative, the worst-performing unchosen alternative, and their expectations. The former two are social-comparison-based standards and the latter one is a temporal-comparison-based standard. Among these reference points, we further found that managers equally favored social and temporal comparison information when assessing their postdecisional regrets. In other words, temporal comparison processes were not secondary to social comparison in regret assessment. In addition, the present study also demonstrated that managers’ postdecisional regret is mainly driven by a loss or gain relative to each reference point rather than by the magnitude of that loss or gain. While the foregone alternative has long been the dominant focus in most regret studies, the present finding that multiple reference points may influence regret enlarges our understanding of postdecisional regret.

Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14, 396-402

Bègue, L. (2005). Self-esteem regulation in threatening social comparison: The roles of belief in a just world and self-efficacy. Social Behavior and Personality: An international journal, 33, 69-76.

Bell, D. E. (1982). Regret in decision making under uncertainty. Operations Research, 30, 961- 981.

Bell, D. E. (1985). Disappointment in decision making under uncertainty. Operations Research, 33, 1-27.

Bridges, E. (1993). Service attributes: Expectations and judgments. Psychology & Marketing, 10, 185-197.

Buunk, B. P. (1995). Comparison direction and comparison dimension among disabled individuals: Toward a refined conceptualization of social comparison under stress. Personality and Social Psychology Bulletin, 21, 316-330.

Buunk B. P., & Ybema, J. F. (1997). Social comparisons and occupational stress: The identification-contrast model. In B. P. Buunk & F. X. Gibbons (Eds.), Health, coping, and well-being: Perspectives from social comparison theory (pp. 359-388). Hillsdale, NJ: Erlbaum.

Collins, R. L. (1996). For better or worse: The impact of upward social comparison on self-evaluations. Psychological Bulletin, 119, 51-69.

Festinger, L. (1954). A theory of social comparison processes. Human Relations, 7, 117-140. Frederick, S., & Loewenstein, G. (1999). Hedonic adaptation. In D. Kahneman, E. Diener, & N.

Schwarz (Eds.), Well-being: The foundations of hedonic psychology (pp. 302-328). New York: Russell Sage.

Gibbons, F. X., & Gerard, M. (1991). Downward comparison and coping with threat. In J. Suls & T. A. Wills (Eds.), Social comparison: Contemporary theory and research (pp. 317-345). Hillsdale, NJ: Erlbaum.

Gibbons, F. X., Gerrard, M., Lando, H. A., & McGovern, P. G. (1991). Social comparison and smoking cessation: The role of the “typical smoker.” Journal of Experimental Social Psychology, 27, 239-258.

Inman, J. J., Dyer, J. S., & Jia, J. (1997). A generalized utility model of disappointment and regret effects on post-choice valuation. Marketing Science, 16, 97-111.

Kahneman, D. (1992). Reference points, anchors, norms, and mixed feelings. Organizational Behavior and Human Decision Processes, 51, 296-312.

Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263-291.

Lockwood, P. (2002). Could it happen to you? Predicting the impact of downward comparisons on the self. Journal of Personality and Social Psychology, 82, 343-358.

Loomes, G., & Sugden, R. (1982). Regret theory: An alternative theory of rational choice under uncertainty. The Economic Journal, 92, 905-824.

Loomes, G., & Sugden, R. (1987). Testing for regret and disappointment in choice under uncertainty. The Economic Journal, 97, 118-129.

Mellers, B. A., Schwartz, A., & Ritov, I. (1999). Emotion-based choice. Journal of Experimental Psychology, 128, 332-345.

Oliver, R. L. (1996). Satisfaction: A behavioral perspective on the consumer. New York: McGraw-Hill.

Ordóñez, L. D., Connolly, T., & Coughlan, R. (2000). Multiple reference points in satisfaction and fairness assessment. Journal of Behavioral Decision Making, 13, 329-344.

Roese, N. J. (1994). The functional basis of counterfactual thinking. Journal of Personality and Social Psychology, 66, 805-818.

Sanna, L. J., & Turley, K. J. (1996). Antecedents to spontaneous counterfactual thinking: Effects of expectancy violation and outcome valence. Personality and Social Psychology Bulletin, 22, 906-919.

Suls, J., & Mullen, B. (1984). Social and temporal bases of self-evaluation in the elderly: Theory and evidence. International Journal of Aging and Human Development, 18, 111-120.

Swallow, S. R., & Kuiper, N. A. (1993). Social comparison in dysphoria and nondysphoria: Differences in target similarity and specificity. Cognitive Therapy and Research, 17, 103-122.

Tsiros, M. (1998). Effect of regret on post-choice valuation: The case of more than two alternatives. Organizational Behavior and Human Decision Processes, 76, 48-69.

Van Dijk, E., & Zeelenberg, M. (2005). On the psychology of ‘if only’: Regret and the comparison between factual and counterfactual outcomes. Organizational Behavior and Human Decision Processes, 97, 152-160.

Wills, T. (1981). Downward comparison principles in social psychology. Psychological Bulletin, 90, 245-271.

Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14, 396-402

Bègue, L. (2005). Self-esteem regulation in threatening social comparison: The roles of belief in a just world and self-efficacy. Social Behavior and Personality: An international journal, 33, 69-76.

Bell, D. E. (1982). Regret in decision making under uncertainty. Operations Research, 30, 961- 981.

Bell, D. E. (1985). Disappointment in decision making under uncertainty. Operations Research, 33, 1-27.

Bridges, E. (1993). Service attributes: Expectations and judgments. Psychology & Marketing, 10, 185-197.

Buunk, B. P. (1995). Comparison direction and comparison dimension among disabled individuals: Toward a refined conceptualization of social comparison under stress. Personality and Social Psychology Bulletin, 21, 316-330.

Buunk B. P., & Ybema, J. F. (1997). Social comparisons and occupational stress: The identification-contrast model. In B. P. Buunk & F. X. Gibbons (Eds.), Health, coping, and well-being: Perspectives from social comparison theory (pp. 359-388). Hillsdale, NJ: Erlbaum.

Collins, R. L. (1996). For better or worse: The impact of upward social comparison on self-evaluations. Psychological Bulletin, 119, 51-69.

Festinger, L. (1954). A theory of social comparison processes. Human Relations, 7, 117-140. Frederick, S., & Loewenstein, G. (1999). Hedonic adaptation. In D. Kahneman, E. Diener, & N.

Schwarz (Eds.), Well-being: The foundations of hedonic psychology (pp. 302-328). New York: Russell Sage.

Gibbons, F. X., & Gerard, M. (1991). Downward comparison and coping with threat. In J. Suls & T. A. Wills (Eds.), Social comparison: Contemporary theory and research (pp. 317-345). Hillsdale, NJ: Erlbaum.

Gibbons, F. X., Gerrard, M., Lando, H. A., & McGovern, P. G. (1991). Social comparison and smoking cessation: The role of the “typical smoker.” Journal of Experimental Social Psychology, 27, 239-258.

Inman, J. J., Dyer, J. S., & Jia, J. (1997). A generalized utility model of disappointment and regret effects on post-choice valuation. Marketing Science, 16, 97-111.

Kahneman, D. (1992). Reference points, anchors, norms, and mixed feelings. Organizational Behavior and Human Decision Processes, 51, 296-312.

Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263-291.

Lockwood, P. (2002). Could it happen to you? Predicting the impact of downward comparisons on the self. Journal of Personality and Social Psychology, 82, 343-358.

Loomes, G., & Sugden, R. (1982). Regret theory: An alternative theory of rational choice under uncertainty. The Economic Journal, 92, 905-824.

Loomes, G., & Sugden, R. (1987). Testing for regret and disappointment in choice under uncertainty. The Economic Journal, 97, 118-129.

Mellers, B. A., Schwartz, A., & Ritov, I. (1999). Emotion-based choice. Journal of Experimental Psychology, 128, 332-345.

Oliver, R. L. (1996). Satisfaction: A behavioral perspective on the consumer. New York: McGraw-Hill.

Ordóñez, L. D., Connolly, T., & Coughlan, R. (2000). Multiple reference points in satisfaction and fairness assessment. Journal of Behavioral Decision Making, 13, 329-344.

Roese, N. J. (1994). The functional basis of counterfactual thinking. Journal of Personality and Social Psychology, 66, 805-818.

Sanna, L. J., & Turley, K. J. (1996). Antecedents to spontaneous counterfactual thinking: Effects of expectancy violation and outcome valence. Personality and Social Psychology Bulletin, 22, 906-919.

Suls, J., & Mullen, B. (1984). Social and temporal bases of self-evaluation in the elderly: Theory and evidence. International Journal of Aging and Human Development, 18, 111-120.

Swallow, S. R., & Kuiper, N. A. (1993). Social comparison in dysphoria and nondysphoria: Differences in target similarity and specificity. Cognitive Therapy and Research, 17, 103-122.

Tsiros, M. (1998). Effect of regret on post-choice valuation: The case of more than two alternatives. Organizational Behavior and Human Decision Processes, 76, 48-69.

Van Dijk, E., & Zeelenberg, M. (2005). On the psychology of ‘if only’: Regret and the comparison between factual and counterfactual outcomes. Organizational Behavior and Human Decision Processes, 97, 152-160.

Wills, T. (1981). Downward comparison principles in social psychology. Psychological Bulletin, 90, 245-271.