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

Christoph Carnehl () and Johannes Schneider ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

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. To finish fast, the agent delays exploring alternatives reducing the overall success probability.

Keywords: dynamic problem solving; endogenous bandits; time pressure (search for similar items in EconPapers)
JEL-codes: D01 D83 O31 (search for similar items in EconPapers)
Pages: 53
Date: 2022-03
New Economics Papers: this item is included in nep-mic and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2022_342

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