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

Rawley Heimer, Zwetelina Iliewa, Alex Imas and Martin Weber

No 30910, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document a robust dynamic inconsistency in risky choice. Using a unique brokerage dataset and a series of experiments, we compare people's initial risk-taking plans to their subsequent decisions. Across settings, people accept risk as part of a “loss-exit” strategy—planning to continue taking risk after gains and stopping after losses. Actual behavior deviates from initial strategies by cutting gains early and chasing losses. More people 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 explore implications for theory and welfare.

JEL-codes: D01 D90 G40 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-exp
Note: AP
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Citations: View citations in EconPapers (3)

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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 (2021)
Working Paper: Dynamic Inconsistency in Risky Choice: Evidence From the Lab and Field (2021)
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