Regret and Regulation. The Power of Regret, Power of Persuasion and the Regulatory Compliance/Non-Compliance Continuum: Better Understanding Compliance Through the Prism of Regret

Abstract

The behavioral literatures are giving greater attention to how the emotions are shaping the preferences, judgment, behaviours, actions and decisions of individuals and organizations. Behavioral research has recently transitioned from the emotions in general to more granular analysis of specific emotions especially those that generate more negative, aversive and “painful” feelings for decision makers.
Among the emotions, the many varieties of regret: actually experienced, anticipated, repetitive, cumulative, persistent, incidental, carry-over, fear of future regret, and anticipation of counterfactual regret from making the wrong decision, clearly represent the most powerful emotion when individuals and organizations are functioning in business, market, regulatory, network and related contexts. Regret therefore is arguably the preferred starting point when state and non-state regulators are using the behavioral and emotional lens and the dual-processing model of neuroeconomics to enhance the effectiveness of their functions, messages and persuasions.
The purpose of this wide-ranging “exploratory” working paper is to apply the power of regret to the compliance and non-compliance of firms, other regulated entities, and individuals with laws, regulations and social norms. The major argument is that the power of regret, and regret’s ability to enhance the power of persuasion, should be emphasized when state and non-state regulators, including competition and other authorities and the compliance divisions of firms and other regulated entities, are designing, priming, framing, distributing and targeting their compliance promotion, enforcement, deterrence, outreach, education and related policies, functions, messages, and persuasions. The behavioral lens and regret prism employed in this working paper build on the previous research of the author on regulatory compliance and performance over the past two plus decades.

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