Cold Feet

Theoretical Economics, Vol. 2, pp. 231-259, 2007

31 Pages Posted: 27 Dec 2009  

Larry G. Epstein

Boston University - College of Arts and Sciences

Igor Kopylov

University of California, Irvine

Date Written: December, 24 2009

Abstract

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

Epstein, Larry G. and Kopylov, Igor, Cold Feet (December, 24 2009). Theoretical Economics, Vol. 2, pp. 231-259, 2007. Available at SSRN: https://ssrn.com/abstract=1527962

Larry G. Epstein

Boston University - College of Arts and Sciences ( email )

Department of Economics, Room 352
270 Bay State Road
Boston, MA 02215
United States
617-353-4142 (Phone)

Igor Kopylov (Contact Author)

University of California, Irvine

Campus Drive
Irvine, CA 62697-3125
United States

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