Play it Again! A Natural Experiment on Definitivity Avoidance

52 Pages Posted: 9 Aug 2019 Last revised: 29 Feb 2020

See all articles by Thomas Bassetti

Thomas Bassetti

University of Padova - Department of Economics

Stefano Bonini

Stevens Institute of Technology - School of Business

Fausto Pacicco

LIUC - Università Cattaneo

Filippo Pavesi

Università Carlo Cattaneo (LIUC) - Institute of Economics; Stevens Institute of Technology - School of Business

Date Written: February 26, 2020

Abstract

In this paper we introduce Definitivity Avoidance, a behavioral bias that induces individuals to inefficiently shy away from choices that involve a final judgment. We model its effects and explore how the introduction of explicit exposure mechanisms can contribute to attenuate them. Using a unique natural experiment - the introduction of a technology assisted review system in professional tennis - we test the model predictions and confirm the relevance of this behavioral bias in a competitive setting. Possible instances of definitivity avoidance can be identified in multiple contexts such as debt roll-over decisions, inefficient asset allocations, court rulings, and child adoptions. The broad applicability of our model carries relevant policy implications as it provides a conceptual framework for the design of institutions to alleviate the welfare costs associated with definitivity avoidance.

Keywords: Prospect Theory, Natural experiment, Uncertainty, Decision Avoidance, Behavioral Economics

JEL Classification: D81, D91, C93

Suggested Citation

Bassetti, Thomas and Bonini, Stefano and Pacicco, Fausto and Pavesi, Filippo, Play it Again! A Natural Experiment on Definitivity Avoidance (February 26, 2020). Available at SSRN: https://ssrn.com/abstract=3432981 or http://dx.doi.org/10.2139/ssrn.3432981

Thomas Bassetti

University of Padova - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

Stefano Bonini (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Fausto Pacicco

LIUC - Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

Filippo Pavesi

Università Carlo Cattaneo (LIUC) - Institute of Economics ( email )

21053 Castellanza (VA)
Italy

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

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