Describe the concept of regret in Prospect Theory.

Describe the concept of regret in Prospect Theory.

In Prospect Theory, regret refers to the emotional response individuals experience when they perceive that they have made a suboptimal decision or missed out on a better outcome. It is a key component of the theory's framework, which suggests that people's decision-making is influenced not only by the potential gains or losses but also by the anticipation of regret. Regret aversion is a common behavior observed in individuals, where they tend to avoid actions that may lead to regret, even if it means sacrificing potential gains. This concept highlights the importance of emotions and psychological factors in decision-making processes, rather than solely focusing on rationality and expected utility.