Log in / Register
Home arrow Business & Finance arrow Chronic Regulatory Focus and Financial Decision-Making
< Prev   CONTENTS   Next >

2.2.7 Decision Making General Decision Making

Decision makers in a promotion focus will view promotion-focused outcomes as more important in their decision than prevention-focused outcomes, and the same goes for prevention-focused decision makers (Higgins 2002). When people make choices for others or themselves, a different regulatory focus is dominant. In gen- eral, those who make decisions for others, or proxy decision makers, they examine and seek out more information than those who make their own choices, or personal decision makers (Jonas et al. 2005; Kray 2000; Polman 2010; Polman and Emich 2011). Among personal decision makers, a prevention focus is activated, and among proxy decision makers, a promotion focus is activated (Polman 2012).

Even the willingness of participants to continue working on tasks is affected by their chronic regulatory focus (Wan et al. 2009). In an experiment, participants were interrupted whilst in the process of describing an abstract figure, then given a choice after the interruption to resume describing the same figure or alternatively, switching to the task of describing a new figure. Those with a promotion focus were more willing to switch to a new description than those with a prevention focus, who were more likely to continue to describe the same figure (Wan et al. 2009). The amount of choices available is also associated with regulatory focus. When there are more choices, the promotion focus leads to increases in choice confidence and likelihood (Som and Lee 2012). Economic Decision Making

The chronic orientation, in tandem with the way a product is chosen, has an effect on the monetary value of the latter (Avnet and Higgins 2006). This may have implications for the way consumers value and select investment products. In an experiment conducted by Avnet and Higgins (2006), where participants were given a choice between two varieties of the same product, chronic promotion-focused participants' use of emotions to make a choice which increased the monetary value of the chosen product, whilst chronic prevention-focused participants' use of emotions to make a choice having the opposite effect. When prevention-focused participants used reason to make a choice, the monetary value of the product increased, with the reverse effect for promotion-focused participants.

Participants in the feeling-based condition were told to rate for several pre-selected emotions when exposed to the products and those in the reason-based condition were told to rate their evaluation of each product for pre-determined evaluation items. Promotion-focused people who received success feedback expe- rience fit and prevention-focused people experienced non-fit, whereas prevention-focused people who received failure feedback experience fit and promotion-oriented people experienced non-fit (Avnet and Higgins 2006). Regarding retail shopping, the promotion (prevention) focus is positively (nega- tively) associated with impulsiveness (Das 2015). The promotion (prevention) focus also has a negative (positive) relationship with attitudinal and behavioural loyalty.

2.2.8 Summary

Thus, regulatory focus theory is able to explain behaviour over several domains, indicating its generalisability. In this regard, the next section explores how regu- latory focus can be applied to finance. However, solely applying regulatory focus theory to research regarding financial decision-making is inadequate. This book thus applies both regulatory focus theory and existing financial concepts in studying financial decision-making. This will allow the study to advance an unbiased understanding of how one makes financial allocation choices, without overlooking theories that may give insight to the issue at hand.

Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
Business & Finance
Computer Science
Language & Literature
Political science