Anticipated Regret and Product Innovation

Management Science, Forthcoming

35 Pages Posted: 14 Dec 2015 Last revised: 15 Sep 2016

See all articles by Baojun Jiang

Baojun Jiang

Washington University in Saint Louis - John M. Olin Business School

Chakravarthi Narasimhan

Washington University in St. Louis - John M. Olin Business School

Ozge Turut

Sabanci University

Date Written: March 16, 2016

Abstract

When a firm introduces a product with new features, some consumers may find it difficult to assess their valuations for these new attributes. Their purchase decisions made under such uncertainty may lead to post-purchase regret. It has been experimentally shown that consumers anticipate their potential post-purchase regret in the future and make their current choices to mitigate or minimize it. That is, a consumer's anticipated regret can significantly impact his purchase decision. Given the trend among the firms in various markets to invoke regret to stimulate sales, this paper analytically explores whether and how anticipated regret affects competing firms' profits and product innovation. We find that anticipated regret can have both positive and negative effect on innovation and firms' profits. Our analyses reveal that the consumer's anticipated regret has non-monotonic effects on the level of innovation and firms' profits.

Keywords: anticipated regret, product innovation, behavioral economics, pricing, segmentation, competition

JEL Classification: D43, C72,D80

Suggested Citation

Jiang, Baojun and Narasimhan, Chakravarthi and Turut, Ozge, Anticipated Regret and Product Innovation (March 16, 2016). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2675341 or http://dx.doi.org/10.2139/ssrn.2675341

Baojun Jiang (Contact Author)

Washington University in Saint Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States
3149353315 (Phone)

HOME PAGE: http://apps.olin.wustl.edu/faculty/Jiang/

Chakravarthi Narasimhan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive, Campus Box 1133
Olin School of Business
St. Louis, MO 63130-4899
United States
314-935-6313 (Phone)
314-935-6359 (Fax)

Ozge Turut

Sabanci University ( email )

Orta Mahalle √úniversite Caddesi 27
Istanbul, Orhanli, 34956 Tuzla 34956
Turkey

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