Theoretical Economics, Vol. 2, pp. 231-259, 2007
31 Pages Posted: 27 Dec 2009
Date Written: December, 24 2009
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.
Keywords: cold feet, pessimism, temptation, choice of belief
JEL Classification: D81, D83
Suggested Citation: Suggested Citation