Using a multiple-trial stock market decision paradigm, the possibility that counterfactual thinking can be dysfunctional for learning and performance by distorting the processing of outcome information was examined. Correlational (Study 1) and experimental (Study 2) evidence suggested that counterfactuals are associated with a decrease in experiential learning. When counterfactuals were made salient, participants displayed significantly poorer performance compared to their counterparts for whom counterfactuals were relatively less salient. A counterfactual salience ? need for cognition (NFC) interaction qualified these findings. High (...) NFC participants outperformed their counterparts when counterfactuals were not salient. Evidence for a memory-based mechanism was also supported. (shrink)

Three experiments demonstrated that decisions resulting in considerable amounts of profit, but missed alternative outcomes of greater profits, were rated lower in quality and produced more regret than did decisions that returned lesser amounts of profit but either did not miss or missed only slightly better alternatives. These effects were mediated by upward counterfactuals and moderated by participants’ orientation to the decision context. That decision evaluations were affected by the availability and magnitude of alternative outcomes rather than the positivity of (...) actual outcomes is counter to the outcome bias effect—a bias in which decisions are rated more positively when they led to more positive outcomes. Experiment 3 demonstrated that these effects represent a bias that occurs even when it is clear that the process by which decisions were made followed rational decision processes. This research suggests that when alter.. (shrink)