Regret lotteries are like regular lotteries on emotional steroids. Here’s how they work.
It’s Saturday night and the weekly lottery draw appears on the television. You don’t need to get your lottery ticket because you always choose the same numbers anyway. The balls start dropping from the big glass bubble — 29, 4, 71, 49.. You can’t believe it. These are your numbers — your birthdate and age. You’ve won.. millions! You run to find your partner and tell him the good news.
We are all familiar with the concept of a lottery. People buy tickets to enter the lottery and prizes are randomly distributed to ticket holders.
Lotteries are not just for giving away $25 million jackpots either. We often see them used to incentivise workers to perform specific tasks or exhibit certain behaviours. For example, for every deal a sales consultant closes, they are given 1 entry into a prize draw. Every month a consultant’s name is picked from a barrel, with more tickets entered for the higher performing consultants. This lottery technique has been shown to motivate people particularly well. A reward of a 1 in 20 chance to win a $100 gift card is more enticing than simply giving a $5 gift card to all 20 entrants.
Lotteries with large prizes can be powerful motivators for employees to perform well at their jobs. But, there is a variation to this standard lottery game that has proven to be even more potent — the regret lottery.
So there’s this powerful thing called ‘regret aversion’
Regret aversion theory says that while we are making decisions, we anticipate the level of regret that we may have after having made that decision. This anticipation of regret influences the decision we make, as we strive to reduce the possibility of us feeling any sense of regret.
Humans are generally risk averse and we feel the cost of loss more than we enjoy a gain of similar proportion. If I were to offer you a bet with a 50% chance of winning $100 and a 50% chance of losing $100 from your wallet, you most likely wouldn’t take the offer. I might need to offer you a deal of $200 win to $100 loss for you to take the deal. Even then, you might feel too risk-averse to accept the bet. As you can see, our brains are heavily stacked in the loss frame of mind.
This loss aversion mindset is what makes the regret lottery so powerful.
How does the regret lottery work?
In a regret lottery, every person is given a lottery ticket. The participants need to ‘activate’ their lottery ticket by meeting certain criteria set by the lottery organiser. For example, a criterion might be that you must arrive on time to work for all 5 days of that week.
When it’s time to draw the prize, all lottery tickets, activated or not, are included in the draw. If a person’s ticket is drawn but they haven’t met the criteria to ‘activate’ the ticket, then they cannot win the prize. The prize is either redrawn or nobody wins, and it is forfeited or jackpotted for the next draw.
The difference between the regret lottery and a regular lottery is all in the mind. In the regular lottery we never had a ticket and so didn’t feel the loss. In the regret lottery we had a ticket and we could have won had we just met that one criterion. It hurts!
Having your ticket drawn and not being eligible for the prize creates a strong feeling of regret, which is much more powerful than if you hadn’t ever entered the draw at all.
A final word of caution
Because regret lotteries have a strong psychological effect, they also come with a warning label on the bottle. If you currently run a normal lottery and want to switch it to a regret lottery, you might receive a backlash from participants who may feel that they are being emotionally manipulated. When implementing behavioural techniques like the regret lottery, we should always consider the welfare of the participants and what adverse effects they may cause.
It’s Saturday night and you’ve found your partner to give him the good news about your amazing lottery win.
“Where did you put that slip of paper I gave you yesterday?” you ask.
“That scrappy little thing?”, he answers. “Oh, I threw that in the trashcan at the park.”
Your heart cries in melancholic ballads as you realise that the only thing worse than not winning the lottery, is winning the lottery and then losing your ticket.
- Have you ever been a participant in a regret lottery? How did you feel?
- Have you ever organised a regret lottery? How did it go?