Cutting losses with regret: An experiment on the disposition effect

We present a controlled experimental analogue of the disposition effect in which feedback separates the behavioural effect of regret on holding the chosen option from that of losses. The experiment combined a two-stage gamble structure from disposition-effect experiments with the gamble-pair paradigm from regret research. Consistent with the disposition effect, participants held their chosen option more often after losses than after gains. Within losses, regret feedback reduced the hold rate: participants were less likely to hold a losing option after learning that the forgone option had a better outcome. This effect was moderated by affective responses to losses, with stronger negative affect associated with a larger regret effect. The reduction in hold rate was not driven merely by counterfactual feedback, as equal-forgone-outcome feedback did not produce the same effect. We interpret the findings as suggesting that experienced regret may mitigate the disposition effect through reduced commitment to the regretted choice.