Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field

Rawley Heimer (), Zwetelina Iliewa (), Alex Imax () and Martin Weber
Additional contact information
Rawley Heimer: Carroll School of Management, Boston College
Zwetelina Iliewa: University of Bonn
Alex Imax: Booth School of Business, University of Chicago

No 94, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We document a robust dynamic inconsistency in risky choice. Using a unique brokerage dataset and two preregistered experiments, we compare people’s initial risk-taking plans to their subsequent decisions. In both settings, people accept risk as part of a “loss-exit” strategy—planning to continue taking risk after gains and stopping after losses. Actual behavior follows the reverse pattern, deviating from initial strategies by cutting gains early and chasing losses. More individuals accept risk when offered a commitment to their initial strategy. Our results help reconcile seemingly contradictory findings on risk-taking in static versus dynamic contexts. We discuss implications for theory and welfare.

Pages: 75 pages
Date: 2021-05
New Economics Papers: this item is included in nep-exp
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Citations: View citations in EconPapers (5)

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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_094_2021.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field (2025)
Working Paper: Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field (2023)
Working Paper: Dynamic Inconsistency in Risky Choice: Evidence From the Lab and Field (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:094

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