12 Pages Posted: 15 Feb 2016 Last revised: 27 Mar 2019
Date Written: February 14, 2016
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