Reversal Costs
12 Pages Posted: 15 Feb 2016 Last revised: 27 Mar 2019
Date Written: February 14, 2016
Abstract
We introduce a hitherto neglected but important concept which we call “reversal costs.” Reversal costs are the cost of undoing a decision. They figure in the background of all decision-making, and their analysis can explain many common phenomena. We present a simple formal model and illustrate the concept using several examples.
Keywords: reversal costs, rational choice theory
JEL Classification: D11
Suggested Citation: Suggested Citation
Mielniczuk, Tomasz and Pi, Daniel, Reversal Costs (February 14, 2016). Available at SSRN: https://ssrn.com/abstract=2732335 or http://dx.doi.org/10.2139/ssrn.2732335
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