Acting Wastefully but Feeling Satisfied: Understanding Waste Aversion

Abstract

Paying more than one could have paid to obtain the same outcome is wasteful. In four experiments, we show that waste aversion can lead people to prefer a more wasteful outcome over a more frugal outcome, as long as it eliminates the feeling of wastefulness. In Study 1, we measured participants' satisfaction with lottery outcomes to find that they are less satisfied with their obtained outcome relative to an inferior, dominated, outcome—if they are aware of a counter-factual in which they could have paid less to achieve the dominant outcome. Study 2 revealed that responsibility for the decision that led to the outcome does not intensify the effect, suggesting that wastefulness is a more prominent explanation for the effect than regret. Study 3 extended the results from outcome satisfaction to decisions. Participants altered their choice of whether to continue or terminate searching for an apartment based on their awareness of a counterfactual that renders the process leading to the outcome as wasteful or not. Waste aversion leads participants to extend their search beyond what they would do based purely on their preferences and expectations. Study 4 replicated these findings with payoff-relevant decisions. Taken together, these four studies establish that waste aversion leads to higher satisfaction with dominated outcomes in real-world experiences. The effect does not rely on decision regret, and may lead to suboptimal decisions.