Regret and Regulation: The Power of Regret, The Power of Persuasion, and the Regulatory Compliance/Non-Compliance Continuum

Abstract

The behavioral literatures are giving greater attention to how the emotions are shaping the preferences, judgment, behaviours, actions and decisions of market and regulatory actors. Behavioral research has recently transitioned from the emotions in general to more granular analysis of specific emotions and especially those that generate more negative and aversive feelings for decision makers. Among the emotions, regret in its various forms: actually experienced, anticipated, repetitive, cumulative, persistent, incidental, fear of future regret, and anticipation of counterfactual regret, appears to be the most powerful emotion when individuals and organizations are functioning in market, regulatory and network contexts.
The purpose of this working paper is to apply the power of regret to the compliance of firms, other regulated entities, and individuals with laws, regulations and social norms. The major argument is that the power of regret should be given priority when state and non-state regulators, including governments and their competition and other regulatory authorities, are designing, priming, framing, distributing and targeting their compliance promotion, enforcement, deterrence, outreach, education and other policies, programs, messages, and persuasions. The behavioral lens employed in this working paper builds on the previous research of the author on regulatory compliance and performance over the past two decades.

Keywords: regulatory compliance, regret, cognitive biases, social and emotional brains