Larry G. Epstein
Boston University - College of Arts and Sciences
University of California, Irvine
December, 24 2009
Theoretical Economics, Vol. 2, pp. 231-259, 2007
Individuals often lose confidence in their prospects as they approach the `moment of truth.' An axiomatic model of such individuals is provided. The model adapts and extends (by relaxing the
Independence axiom) Gul and Pesendorfer's model of temptation and self-control to capture an individual who changes her beliefs so as to become more pessimistic as payoff time approaches. In a variation of the model, the individual becomes more optimistic at an ex post stage in order to feel better about her available options.
Number of Pages in PDF File: 31
Keywords: cold feet, pessimism, temptation, choice of belief
JEL Classification: D81, D83
Date posted: December 27, 2009
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