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 Picture this: Minsu and Nathan are buying a pair of designer jeans at an outlet mall in Boston. Minsu is very happy to learn that he pays $200 for the pair. On the other hand, Nathan feels unhappy when he learns that he pays $200 for the pair. What causes this emotional imbalance between these two people? Minsu lives in Seoul where clothing prices are usually higher, whereas Nathan happens to stop at this mall while traveling from a small town, Austin, TX, where clothing costs less. One explanation for Minsu’s happiness and Nathan’s unhappiness derives from two types of thinking that are likely to run through their minds. First, neither expected this price. Second, Minsu and Nathan used different standards when eval-uating the price: Minsu compared the price with the average price of the same brand of jeans in Seoul, which normally go for about $300-400, while Nathan compared the price with prices from his hometown. That is, Nathan’s unhappy feeling, presumably instigated by his unexpectedness, was further intensified by his imagining an alternative counterfactual situation (i.e., “what if I had purchased a pair of jeans back in Austin?”). Conversely, Minsu was pleasantly surprised to discover that the price was cheaper than back home.

 Consumers constantly encounter counterfactual thinking in their everyday lives, and this has many consequences. As seen in the above scenario, for example, a consumer’s counterfactual thinking, often initiated by a negative emotional experience (Roese, 1997), can amplify the individual’s emotional status (Kahneman & Miller, 1986) – it can aggravate negative emotions, or sometimes it can boost happy feelings.  Furthermore, previous research in social psychology indicates that counterfactual thinking also plays a central role in cognition (e.g., Miller, Turnbull, & McFarland, 1989) and behavior (Roese, 1994). Regardless of the close connection between counterfactual thinking and affect, cognition, and behavior, all of which are considered important variables in consumer research, few have looked into the role of counterfactual thinking in the context of consumer behavior. The main thesis of this article can be summarized in one question: how does counterfactual thinking influence consumers’ perceptions and assessments of various promotional activities such as advertising and PR?  In order to answer this question, I begin by examining the consequences of counter-factual thinking that have been identified in the social psychology literature.

 First of all, in this paper, I discuss two underlying mechanisms of counterfactual thinking: the contrast effect mechanism and the causal inference mechanism. These two mechanisms account for nearly all counterfactual consequences. Second, based on this dual mechanism theory, I briefly review previous studies to provide evidence supporting how counterfactual thinking influences affect and cognition via its dual mechanism. Contrast effects and causal interferences may sometimes operate independently, but work jointly in other instances. Third, I examine why people engage in counterfactual thinking and its behavioral consequences. Functionalists have successfully demonstrated that in the long-term, counterfactual thoughts are more beneficial than harmful (Roese, 1997). Finally, I draw a theoretical connection between these findings and implications for advertising research.

Dual Mechanisms of Counterfactual Thinking

 Counterfactual thinking is the mental process of thinking about the unrealized alterative version of a past or present outcome, which typically takes the form of a conditional statement (e.g., “If I had bought the same pair of jeans in Seoul, I would have paid more”). By engaging in counterfactual thinking, an individual ‘mutates’, or alters, the actual outcome (Kahneman and Miller, 1986). During the process of counterfactual thinking, an individual first considers what could have been the alternative outcome (e.g., paying more), and assesses how the alternative counterfactual outcome could have been achieved by mutating the factual outcome (e.g., “only if I had been in Seoul”). This dual stage of the process allows counterfactual thinking to be considered a type of causal attribution wherein the perceived antecedents are mentally altered to undo the given outcome and achieve the counterfactual outcome. Studies have found that counterfactual availability is influenced by numerous factors such as unexpectedness of outcome, temporal order of events, closeness to alternative outcomes, and mutability and salience of antecedents. Roese (1997) further classified these factors into two main categories: affect and perceived closeness as the main determinants of counterfactual activation; antecedent normality, antecedent action-inaction, and antecedent controllability as the major determinants of counterfactual content.

 Counterfactual thinking has its own structure and direction. Although a variety of terms have been used for its structure (e.g., action/inaction, insertions/deletions, commission/omission, addition/subtraction), counter-factual thoughts either alter a previous action or a previous inaction. A person may engage in the fundamentally same, but superficially different, counterfactual thoughts. For example, having only two alternatives of cities, Seoul and Boston, one might think, “if I had not shopped at Seoul, I would have saved 100 dollars”, or equivalently, “if I had shopped at Boston, I would have saved 100 dollars.” The former takes the form of subtractive counterfactual thoughts (i.e., altering action), while the latter is phrased in the form of additive counterfactual thoughts (i.e., altering inaction). On the other hand, one may imagine a better alternative (i.e., upward counterfactuals), or a worse alternative (i.e., downward counter-factuals). In upward counterfactuals a consumer might think, “if I had shopped at Boston, I would have saved 100 dollars,” but in downward counterfactuals she or he might think, “if I had shopped at Seoul, I would have wasted 100 dollars.” As can be seen in the above example, the structure of counterfactuals is directly tied to the antecedent of the counterfactual statements (“if…had…”), whereas the direction of coun-terfactuals is deeply linked to the outcome of the counterfactuals (“then…would have…”). These are important distinctions as we will see in the later sections of this paper.

 Roese (1997) suggested that all counterfactual consequences were rooted in either of two underlying mechanisms: contrast effects or causal inferences. Contrast effects occur when the counterfactual alternative is salient, and therefore it becomes more accessible. When a better alterative counterfactual outcome is salient (i.e., upward counterfactual thinking), a factual outcome is judged to be worse. But if a worse alternative outcome is more salient (i.e., downward counterfactual thinking), then a given outcome is likely to be judged to be better. As shown in the example in the introduction, the clothing price of designer jeans is perceived to be more expensive by contrast if one has traveled from a town where the designer jeans are cheaper. Norm theory provides a theoretical framework for this contrast effect. Kahneman and Miller (1986) proposed that events are compared to counterfactual alternatives that are constructed ad hoc rather than retrieved from past experience. That is, counterfactual thinking is a backward process, which is constructed after the event rather than in advance, that is guided by the characteristics of the evoking stimulus and by the momentary context. In the example above in the introduction, Nathan’s spontaneous surprise by the unexpected price led to the con-struction of a counterfactual alternative (i.e., “what if I had purchase the same pair of jeans back in Austin?”). Kahneman and Miller (1986) further argue that an individual’s psychological reactions are determined by the direction (i.e., upward / downward) and magnitude of the discrepancy between the factual outcome and the anchor (i.e., closeness). In the above example again, Nathan felt unhappy because he was accustomed to lower prices (i.e., Nathan’s norm was lower than Minsu’s).  According to Kahneman and Miller (1986), the outcome is viewed as normal if it is close to one’s norm or standard, but abnormal if the factual outcome greatly differs from a given norm. The greater the perceived difference between the factual outcome and the norm, the more abnormality noticed, the more counterfactual thinking available to the individual. Since the main driving force of contrast effects is the salience or abnormality of the event, it may be viewed as an automatic process with less emphasis on causality between a counterfactual antecedent (e.g., “if I had …”) and a counterfactual outcome (e.g., “I would have …”). The salience of the alternative outcome via closeness or surprise is a sufficient condition for a contrast effect to occur.

 However, unlike contrast effects, causal inferences are thought to entail a more effortful processing, in which causal linkage between the antecedent and the outcome within the counterfactual statement is crucial. Unlike contrast effects, it is necessary for both the counterfactual an-tecedent and the counterfactual outcome to be salient in order for the causal inference mechanism to operate. The central notion of causal inferences is that a counterfactual statement is closely connected to the true state of an event.  That is, an individual thinking, “if it had not been A, then it would not have been B,” always refers back to the causal linkage between A and B (i.e., “A causes B”). For example, Nathan’s counterfactual state-ment, “if I had not bought an extended warranty for the digital camera I bought last year, I would have spent more money to fix it today” essentially reflects his thinking, “buying an extended warranty leads to saving money.”

 It has been found that contrast and causal inference effects play im-portant roles in various counterfactual consequences. For example, both mechanisms can aggravate negative affect under certain conditions, but under different conditions causal inference mechanism may decrease negative affect (Gleicher, Boninger, Strathman, Armor, Hetts, & Ahn, 1995), while contrast mechanism increases negative affect (e.g., McMullen and Markman, 2002). Roese (1997) asserted that adverse affective consequences are often produced by the contrast-effect mechanism, whereas the causal-in-ference mechanism brings beneficial effects.

Contrast Effects

Affect

 When a better or worse imagined alternative is salient, counterfactual thoughts can have a significant contrast impact on affect. For example, Medvec, Madey, and Gilovich (1995) found that silver medal winners nonetheless feel worse than bronze medalists even though they performed better and received the higher honor. According to Medvec et al. (1995), this satisfaction reversal was due to the fact that different types of coun-terfactual thoughts are imagined by silver medalists and bronze medalists: silver medalists tended to engage in upward counterfactual thinking (e.g., “if I had finished the line a second earlier, I could have won the gold medal”), whereas bronze medalists, in contrast, involved in downward counterfactual thinking (e.g., “at least I won a medal, but what if I had finished a second later and came in fourth?”). Medvec et al.’s (1995) study emphasized the automatic nature of counterfactual thinking, and showed that many counterfactuals can be imposed by the nature of the events experienced. Their findings evidence that contrast effects depend on the automaticity and instant availability of counterfactual thoughts.

 The effect of closeness (i.e., perceived proximity to the counterfactual alternative) on counterfactual thinking was further examined by Medvec and Savitsky (1997). Medvec and Savitsky (1997) showed that barely attaining a cutoff point for a category elicited downward counterfactual comparisons, whereas just missing a cutoff prompted upward counterfactual thoughts. Consistent with Medvec et al.’s (1995) previous findings, Medvec and Savitsky (1997) found that downward counterfactuals boost satisfaction, but upward counterfactuals decrease satisfaction. In their first study, where students learned their final grades, Medvec and Savitsky (1997) demon-strated that falling close to a cutoff for a higher grade (i.e., far from the boundary for a lower grade) was associated with a diminished level of satisfaction. Their second and third studies provided additional evidence for contrast effects by showing those who just missed a cutoff experienced more upward counterfactuals than those who just attained a cutoff, whereas those who just attained a cut off experienced more downward counter-factuals than those who just missed one. Medvec and Savitsky’s (1997) findings are clearly based on contrast effects because qualitative categorical cutoff points (e.g., grade A, B, and C) imposed onto quantitative outcomes (e.g., score 89 and 91) attracted attention, and as a result, it made the counterfactual alternatives more salient and accessible.

Cognition

 Miller and McFarland (1986) demonstrated that counterfactual contrast effects influence judgments. In their first experiment, participants read of a man who lost the use of his right arm as a result of a gunshot wound in which he was involved in either normal or abnormal circumstances. In the normal condition, the gunshot took place in the store he commonly frequented, but in the abnormal condition, the gunshot took place in the store he rarely frequented. It was found that people assigned greater com-pensation to an individual whose victimization was preceded by abnormal actions than to one whose victimization was preceded by normal actions. Normality versus abnormality was again manipulated in Miller and McFarland’s (1986) second experiment with a different scenario. Participants read about a man who attempted to walk to safety after receiving only minor injuries from a plane crash, but eventually died either 75 miles (normal condition), or ¼ mile (abnormal condition) from the nearest town.  Similar contrast effects emerged: the victim who died ¼ mile from safety was assigned greater compensation than the victim who died 75 miles from safety. Consistent with Kahneman & Miller’s (1986) norm theory, findings from these two experiments demonstrated the following contrast effects: 1) closeness and abnormality of the outcome play an im-portant role in one’s counterfactual thinking, and 2) the more strongly outcomes evoke alternatives, the stronger will be any emotional reaction elicited by them.

Causal Inferences

 The influence of counterfactual thinking on causal judgment has been also demonstrated. Wells and Gavanski (1989) showed that people attributed greater causal significance to an event if its counterfactual default alternative would have yielded a different outcome than if the default alternative yielded the same outcome. In Wells and Gavnaski’s (1989) first experiment, participants read the scenario in which a woman died from an allergic reaction to a meal ordered by her boss. When the boss was described as having considered another meal without the allergic ingredient, people were more likely to mutate his decision and his causal role in the death was judged to be greater than when the alternative meal was also said to have the allergic ingredient.  Similar effects also emerged in their second experiment. Participants read the scenario about a paraplegic couple who died in an auto accident after having been denied a cab ride. People perceived the cab driver’s refusal to take the couple as a stronger cause of the deaths when his taking the couple would have undone the accident than when it would have not.

Affect

 Counterfactual thinking can influence affect through the causal in-ference mechanism. For example, suppose you discover that your purchase of a laundry detergent last week turns out to be a poor decision (e.g., buying an expensive, but a low quality detergent at Store A). It may be natural to instantly invoke upward counterfactual thinking through the contrast effect mechanism (e.g., “if I had shopped at Store B, I would have bought a better product”). At the same time, however, it can also reduce your negative feelings by allowing you to identify what caused this negative outcome (i.e., shopping at Store A), which in turn will lead to the realization that you should shop at Store B in the future. This positive effect on affect is based on the causal inference that shopping at Store B in the future will yield a better deal.

 Boninger, Gleicher, & Strathman (1994) found that a dispositional tendency to consider the future consequences of current behavior can ameliorate the negative affect caused by thinking about how a negative outcome could have been avoided. As Boninger et al. (1994) put it, as one’s perspective shifts from thinking about what “might have been” to thinking about “what might be,” counterfactual emotions such as regret and self blame are found to be ameliorated. Moreover, in their second experiment, they also demonstrated that this amelioration is more likely to occur when participants are induced to focus on the future.  Boninger et al. (1994) argued that the future preparative function of counterfactual thinking can, in some cases, improve an individual’s immediate affective response to a negative event. These findings demonstrated that the causal inference mechanism works quite differently than the contrast effect mechanism, by showing that upward counterfactual comparison can not only positively but also immediately influence affect.

 Evidence for causal linkage between counterfactual antecedent and outcome can be found in Niedenthal, Tangney, & Gavanski’s (1994) results.  In Niedenthal et al.’s (1994) experiment, people tended to undo shame situations by altering qualities of the self, but to undo guilt situations by altering actions. Since shame involves an evaluation of the self whereas guilt involves a concern with a specific behavior, the causal inference mechanism, rather than the contrast effect mechanism, seemed to be the operation behind the counterfactual thinking that came to participants’ mind in the study: people only mutate those counterfactual antecedents that causally correspond to the given outcome. That is, people mutated personal characteristics in the shame condition, but behaviors in the guilt condition. Without the process of the causal inference mechanism, Niedenthal et al.’s (1994) results are unlikely, because participants tended to attribute the given counterfactual outcome (e.g., action) to only those counterfactual antecedents (e.g., guilt) that are causally explainable.

 Along the same lines, Zeelenberg, van Dijk, van der Pligt, Manstead, van Empelen, and Reinderman (1998) discovered that regret is related to behavior-focused counterfactual thought, whereas disappointment is related to situation-focused counterfactual thought.  Zeeelenberg’s et al. (1998) asked participants to recall an autobiographical episode of either a regretful or a disappointing event. When asked to undo this event, regret partic-ipants predominantly changed their own actions, whereas disappointment participants predominantly changed aspects of the situation. Similarly, in their second and third studies, with the scenario in which a person experiences a negative event, participants who were instructed to undo the event by changing the person’s actions reported more regret than disappointment, while those who were instructed to undo the event by changing aspects of the situation reported more disappointment than regret. As was the case for Niedenthal et al.’s (1994) study, the causal-in-ference mechanism, rather than the contrast effect mechanism, provides a better explanation for Zeeelenberg’s et al.’s (1998) findings. It was more causally appropriate for participants to alter the protagonist’s own action for regret, but to alter the situational elements for disappointment.

Cognition

 Counterfactual consequences that are ruled by the causal-inference mechanism are examined in many contexts of cognition such as social judgment (e.g., Branscombe and Weir, 1992), self-image (Roese and Olson, 1993), and intentions (Roese, 1994). Branscombe and Weir (1992) found that too much resistance on the part of a victim increases sympathy for the rapist, decreases observers’ confidence that the assault actually was rape, and decreases the sentence advocated for the rapist. Branscombe and Weir (1992) claimed that victim’s stereotype-inconsistent behavior (e.g., too much resistance as a female) would be construed as abnormal and unexpected, so counterfactual alternatives become more accessible. When simulating alternative actions of the victim (e.g., “if she had done some-thing other than what she did”) results in a new outcome (e.g., no rape), what the victim did would be perceived as causally contributing to the original outcome. Although the level of counterfactual generation was not directly measured in their study, Branscombe and Weir’s (1992) study provides some evidence that the causal inference mechanism influences consequences of counterfactual thinking on social judgment.

 Controversy exists over whether there is a negative or positive relationship between counterfactual thinking and hindsight bias. First, since hindsight bias is supposed to exaggerate the factual outcome, counterfactual argument may seem to be less available when hindsight bias is present (Kahneman & Varey, 1990). However, other theorists claim that counterfactual thinking increases the hindsight bias in certain circumstances (Roese and Olson, 1996). One resolution to this apparent inconsistency may derive from Roese’s (1996) dual mechanism explanation. When the contrast effect mechanism is in operation, hindsight bias may hamper the generation of counterfactual thoughts because an imagined alternative outcome becomes less salient. On the contrary, when the causal-inference mechanism is in effect, counterfactual thinking may increase the hindsight bias in that counterfactual thoughts are more likely to strengthen the causal linkage between antecedent and outcome in the factual statement. Roese and Olson (1996) demonstrated that this was the case by showing that causal inferences mediated the positive relationship between counterfactual thinking and hindsight bias.

 For an event to be judged causal of an outcome, the counterfactual alternative to the event must result in different outcomes (Wells & Gavanski, 1989). Related to this point, Markman, Gavanski, Sherman, and McMullen (1995) noted that the factual outcome becomes more sensible, predictable, and controllable, after the generation of counterfactual thinking that is coupled to perception of causality. In their investigation of how counterfactual thinking influences perceived personal control and responsi-bility, McMullen et al. (1995) found that the more participants’ counter-factuals changed the outcomes, the more perceived control participants reported over the recent events that they were instructed to recall. Furthermore, this perceived control acquired through counterfactual thinking is found to mediate the contrast effect of the counterfactual on affect: when counterfactuals lead to feelings of control, the negative affect generated by upward counterfactuals were mitigated. This mediating effect can be accounted for by Roese’s (1997) causal inference mechanism because increased perceived control is rooted in the underlying assumption of the causal linkage between a counterfactual antecedent and its outcome. That is, an individual’s identification of the causal antecedent of the factual outcome via counterfactuals signifies his or her future utilization of the counterfactual. McMullen et al. (1995) also noted that the influence of the counterfactual on affect via the contrast effect is a direct effect, whereas the influence of the counterfactual on affect via the control is an indirect effect (i.e., mediated by control). The latter can be viewed as a subtype of Roese’ (1995) causal inference mechanism. Yet McMullen et al.’s (1995) distinction between direct and indirect effect leaves us with one question: do all causal inference counterfactuals influence affect indirectly rather than directly? One may attempt to concur reasoning that, unlike the contrast mechanism, the causal inferences are usually switched on by psychological needs (e.g., need for future improvement), which naturally entails more effortful, rather than automatic, processing. However, further research in this area is needed to clarify this issue.

Joint Operation

 Can contrast effects and causal inferences co-occur? Although these two are conceptually separate mechanisms, in everyday life we may come across a type of counterfactual thought in which both the contrast effect and the causal inference mechanisms are at work. One may come up with a counterfactual thought initially triggered by contrast effects, but it may later switch to the causal inference mechanism. For example, immediately after spending a large amount of money on shopping before Thanksgiving Day, a consumer may learn that the greatest sale actually begins after the Thanksgiving period. It is likely that a contrast effect occurs initially because she ‘nearly’ missed a better bargain (i.e., the salience of a better alternative due to temporal closeness), so negative emotions may dominate her feelings at first. Yet her disappointment may be mitigated or be transformed into to positive feelings if she subsequently realizes that she will not make the same mistake next year. Here, the causal-inference mechanism takes the place of the contrast effect in the later stage of counterfactual thinking.

 It seems to be a difficult task to completely disentangle one from the other.  Markman et al.’s (1995) ‘Wheel-of-Fortune’ study is an example of a joint operation. Participants in this study saw on a computer screen two wheels that spun simultaneously.  There were two conditions in each of which there were two players (i.e., a participant and a confederate). In the first condition, participants were led to believe that they could have almost won more lottery tickets than they had actually won (by slightly missing the better outcome), but the other player hit ‘bankrupt’ (even worse than the participants’). In the second condition, they were led to believe that they barely missed ‘bankrupt’ (the worst outcome possible) and won 10 tickets, whereas the other player won 75 tickets (better than the participants’ outcome). So both upward and downward counterfactuals were made salient to participants in both conditions. Markman et al. (1995) additionally manipulated perceived control by giving some participants a choice of the position where their own wheel should start and how fast it should spin, whereas other participants chose which wheel would be their own and which would determine the outcome of the other player. In this experiment, Markman et al. (1995) found that those who were in the former condition (i.e., spin choosers) mutated their own spinning behavior (e.g., “if I had started the wheel at a different point…”), whereas participants in the latter condition tended to mutate the wheel they chose (e.g., “if I had played on the other wheel…”). It seems that participants in this study experienced the counterfactuals in which the contrast effect and the causal inference jointly operated.  Closeness (i.e., almost missing ‘jackpot’ or ‘bankrupt’) and the other participant’s outcome, which are the determinants of contrast effects, initially activated their counterfactuals, but later the causal inference mechanism led participants to come up with different contents of counterfactuals that causally correspond to their antecedents.

Why Counterfactual Thinking? Behavioral Consequences

 Consequences of counterfactual thinking on affect and cognition have been examined in the above section. But why do people engage in coun-terfactual thinking? What is its behavioral consequence? It is suggested that counterfactual thinking is frequently initiated by people’s needs to pre-dict and control future events. As attribution theorists and functionalists alike may argue, counterfactual thinking may play a significant role in helping an individual to understand what factors give rise to a certain outcome, to predict how and when the event will happen again, and to avoid the negative outcome next time. Following from this point is the claim that counterfactual thinking is important in preparation for the future. Evidence suggests that counterfactual thinking brings largely positive behavioral consequences to individuals, although not all are without their side effects.¹⁾  For example, Roese (1994) showed that counterfactual thinking can serve the function of preparing for future improvement. Roese (1994) found that generation of upward counterfactual thoughts (i.e., imagining a better alternative counterfactual situation) that follows a failure in an anagram task led to intentions to perform success-facilitating behaviors and, indeed to actual behavioral improvement in a subsequent task. This result is consistent with Bonninger and et al.’s (1994) findings.  In their replication of Kahneman and Tversky’s (1982) alternate-route- home scenario, Bonninger et al. (1994) demonstrated that subjects who were instructed to imagine counterfactual alternatives that might have undone a car accident after reviewing scenarios of a car accident reported higher intention for action than did the control group.

 A number of studies looked at positive and negative consequences of counterfactual thinking. As discussed earlier, Markman et al.’s (1993) found that in a gambling study participant’s generation of upward counterfactuals facilitated preparation for the future. In general, a downward counterfactual may lead to immediate feelings of satisfaction at the expense of preparation for the future, but upward and downward counterfactuals trade off immediate affect and preparation for the future. However, since the net effect of counterfactual thinking is beneficial (Roese, 1997), this trade off is sensible. In sum, studies done in this area indicate that counterfactual thinking generally serves positive behavioral functions, although it sometimes ac-companies negative affective consequences.

 Of course, the causal inference process is not error-free because, in some situations, there are too many or not any counterfactual alternatives available. In order to establish causation, one needs to satisfy two necessary conditions: temporal precedence and covariation (Rosnow and Rosenthal, 1999). When a counterfactual simulation is run in one’s head, the former is obviously established because counterfactual thinking, by definition, is a post-hoc process. However, it is sometimes difficult to detect the latter. Counterfactual antecedent is nothing but an ‘imagined’ cause of an al-ternative outcome, which is not necessarily the ‘real’ cause. This limited capability of identifying the ‘real cause’ of the outcome – whether factual or counterfactual – puts a restriction on the practical utility of counter-factual thinking: one’s imagination of undoing of the factual outcome may not lead to behavioral improvement in the future. It is not only difficult for an individual to come up with a counterfactual that ‘truly’ undoes the factual outcome, but also, in some cases, there is no counter-factual alternative available that undoes the factual outcome. Regardless of its imperfectness, however, behavioral consequences of counterfactual thinking will bring more gains than losses through the causal inference mechanism in the long run – counterfactual thinking generally helps us to be better off.

 Some evidence indirectly and directly supports the claim that, in terms of behavioral improvement, what we gain through counterfactual thinking is by far greater than what we lose. First, as discussed above, negative outcomes are more likely to generate more counterfactuals than positive outcomes (e.g., Gavanski & Wells, 1989). This asymmetrical structure may reflect the status quo where upward rather than downward counter-factual thoughts are more prevalent in our everyday lives. A higher frequency of upward counterfactuals represents higher frequency of preparative function of upward counterfactual thinking. Second, Roese (1994) showed that if people expect to perform a similar task in the near future, they de-liberately engage in upward counterfactual thinking to prepare for the fu-ture even if they had a positive outcome, which is usually known to acti-vate downward counterfactual thinking at other times (i.e., when a similar task is unexpected) in an automatic fashion.

Counterfactual Thinking in Consumer Research

 Consumers attempt to gather all the relevant information to arrive at the most logical conclusion, but at the same time, they also want to be efficient thinkers due to their limited capacity to process information. This basic human characteristic requires us to rely on frequent uses of heuristic cues that generally help reduce one’s cognitive loads in a given market environment. Nevertheless, heuristic processing sometimes leads us to erroneous conclusions because of its inherent contradiction between efficiency and accuracy. For example, one rational behavior often ex-hibited by consumers is their value-seeking behavior. Consumers almost always want to obtain more of the product for the same price, or want to pay less money for the same amount of the product they purchase. In an ideal situation, an individual may gather all the relevant product in-formation before he or she decides where, when, and how to buy the product, but it is virtually impossible in the modern retailing environment. In many cases, people base their purchase decisions on various heuristic cues such as advertising and promotions. The competitive market environ-ment, along with the limitations of human cognition, facilitates the heavy reliance on heuristic processing that may exacerbate non-rational behaviors. People may wrongly use certain cues that are concealed in advertising messages. For example, deals with restrictions (e.g., “limit three per cus-tomer”) are found to increase product sales more than the same deals without such restrictions (Inman, Peter, & Raghubir, 1997).

 Requiring customers to spend a certain dollar amount as a qualification for a discount is one common type of restriction, which consumers may or may not react to rationally. Not having such a minimum-amount restriction (e.g., “30% off all purchases”) rather than having one (e.g., “spend $100, get 30% off”) is obviously a better deal for consumers. We regard this type of restriction as a marketing tool that potentially induces the generation of counterfactual thoughts that produce biased emotions, which in turn leads to false assessments of their buying decisions. Yoon and Vargas (2010) compared the effect of the presence and absence of a categorical cutoff criterion in promotional framing of prices on consumers affect, attitude, and behavioral intentions. It was found that consumers evaluate promotional messages differently when the promotional message includes a minimum amount restriction (e.g., “spend $100, get 30% off”) and when it does not (e.g., “30% off all purchases”). When a minimum amount restriction is present, purchase outcomes sway consumers’ feelings and judgment to a greater extent than when it is absent. In such cir-cumstances where a minimum amount restriction is present, the role of counterfactual thinking is rather dysfunctional. First, a minimum amount restriction in the promotional framing of prices may lead consumers to impulse or unplanned purchases, and may make them buy more than necessary for them to simply obtain a better deal. Second, this type of artificially generated counterfactual thinking may have more long-term detrimental effects. Consumers’ overly satisfied feelings boosted by close downward counterfactuals may mislead consumers’ future behaviors because they misjudge their poor purchase decisions (i.e., buying and spending more than necessary) as a wise choice. The next section considers implications for advertising research. 

Implications for Advertising Research

 Counterfactual thinking, along with reality, guides audience behaviors, thoughts, and feelings. Both contrast effects and causal inferences are of theoretical importance in advertising research, because audiences repeatedly encounter both types of counterfactual thoughts in advertising. Under those circumstances where a purchase decision is made online (e.g., impulse buying), counterfactual thinking may take place automatically via a heuristic processing, which is likely to be dictated by the contrast effect mechanism. On the other hand, the causal inference mechanism may benefit consumers for the most part particularly when they invest a great amount of cognitive resources in their consumption decisions (e.g., high-involvement buying situations). For example, imagine your shopping cart in Store A that holds two items – one DVD player and one pack of batteries. Learning from a TV commercial afterwards that you could have saved a dollar for the battery pack if you had shopped at Store B may activate various types of counterfactuals. For example, it could be subtractive (e.g., “what if I had not bought the battery today?”), additive (e.g., “what if I had checked out both stores before buying?”), upward (e.g., “what if I had shopped at Store B?”), or downward (e.g., “what if I had gone Store B only to discover that the battery is out of stock?”). Following the contrast effect mechanism, the most natural reaction in this scenario appears to be an upward counterfactual, which in turn may worsen your feelings. The counterfactual alternative here is used as a heuristic that simply influences the momentary assessment of your purchase. This type of heuristic-focused counterfactual thinking is not likely to be stored in long-term memory, so it is not very useful for future improvement. On the other hand, the causal inference mechanism is more likely to come into play and to wield more influences, if focusing on a high-involvement product. You may become more convinced that your shopping at Store A was a wise decision if, for example, mutating the counterfactual an-tecedent leads to no change in the factual outcome, or to an even more negative outcome (e.g., “if I had shopped at Store B, I would have bought a low-quality DVD player). In this case, this counterfactual causal attribution will enhance your brand loyalty to Store A. Or alternatively, your counterfactual thinking can mutate the negative aspects of the factual outcome (e.g., “if I had shopped at Store B, I would have had more choices) to engage in upward counterfactual thinking. In either case, this type of counterfactual causal attribution is more likely to result in a long-term effect. The relation between the dual mechanisms of counterfactual thinking (i.e. contrast and causal effect) and dual processing models of persuasion (e.g., elaboration likelihood model) deserves further attention in the domain of advertising research.