 Stopping with anticipated regretTakashi Hayashi Journal of Mathematical Economics, 2009, vol. 45, issue 7-8, 479-490 Abstract: This paper analyzes a stopping problem where the decision maker is driven by anticipated ex-post regret. There are two sources of potential dynamic inconsistency, one is arrival of information and the other is changing choice opportunities over time--discarding the current stopping option may change how she stops the game in the future. First we consider a naive planner who prescribes a commitment solution, and illustrate the nature of the inconsistency problem. Then we consider a sophisticated planner who plays backward induction against her [`]successive selves'. The resolution of dynamic inconsistency does not in general allow the use of standard dynamic programming technique. We provide, however, a simple characterization of the backward induction strategy, which is given in a recursive formula. We also provide a behavioral implication, that larger indeterminacy of belief may lead to a more aggressive behavior, that is, continuing the gamble longer, which contrasts to the implication of ambiguity aversion. Keywords: Stopping; Minimax; regret; Dynamic; inconsistency; Backward; induction (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:45:y:2009:i:7-8:p:479-490 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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