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Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field / Rawley Z. Heimer, Zwetelina Iliewa, Alex Imas, Martin Weber.
- Format:
- Book
- Author/Creator:
- Heimer, Rawley Z.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w30910.
- NBER working paper series no. w30910
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2023.
- Summary:
- We document a robust dynamic inconsistency in risky choice. Using a unique brokerage dataset and a series of experiments, we compare people's initial risk-taking plans to their subsequent decisions. Across settings, people accept risk as part of a "loss-exit" strategy--planning to continue taking risk after gains and stopping after losses. Actual behavior deviates from initial strategies by cutting gains early and chasing losses. More people accept risk when offered a commitment to their initial strategy. Our results help reconcile seemingly contradictory findings on risk-taking in static versus dynamic contexts. We explore implications for theory and welfare.
- Notes:
- Print version record
- February 2023.
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