On Risk and Time Pressure: When to Think and When to Do

56 Pages Posted: 6 Dec 2019 Last revised: 15 Nov 2021

See all articles by Johannes Schneider

Johannes Schneider

Charles III University of Madrid

Christoph Carnehl

Bocconi University

Date Written: November 12, 2020

Abstract

We study the tradeoff between fundamental risk and time. A time-constrained agent has to solve a problem. She dynamically allocates effort between implementing a risky initial idea and exploring alternatives. Discovering an alternative implies progress that has to be converted to a solution. As time runs out, the chances of converting it in time shrink. We show that the agent may return to the initial idea after having left it in the past to explore alternatives. Our model helps explain so-called false starts. The agent takes risks early on to quickly arrive at a solution, sacrificing the prospects of alternatives.

Keywords: dynamic problem solving, endogenous bandits, lean techniques, time pressure

JEL Classification: D01, D83, O31

Suggested Citation

Schneider, Johannes and Carnehl, Christoph, On Risk and Time Pressure: When to Think and When to Do (November 12, 2020). Available at SSRN: https://ssrn.com/abstract=3490935 or http://dx.doi.org/10.2139/ssrn.3490935

Johannes Schneider

Charles III University of Madrid ( email )

Christoph Carnehl (Contact Author)

Bocconi University

Milan, MI 20136
Italy

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
198
Abstract Views
1,415
Rank
271,611
PlumX Metrics