Roese, N. J. (1997). Counterfactual thinking. Psychological Bulletin, 121, 133-148.

Counterfactuals are mental representations of alternatives to the past and they produce consequences that are both beneficial and aversive to the individual. These apparently contradictory effects are integrated in a functionalist model of counterfactual thinking. Research is reviewed supporting the assertions that a) counterfactual thinking is activated automatically in response to negative affect; b) the content of counterfactuals targets particularly likely causes of misfortune; c) counterfactuals produce negative affective consequences via a contrast effect mechanism and positive inferential consequences via a causal inference mechanism; and d) the net effect of counterfactual thinking is beneficial.