Too Proud to Stop: Regret in Dynamic Decisions

Philipp Strack () and Paul Viefers

Journal of the European Economic Association, 2021, vol. 19, issue 1, 165-199

Abstract: Regret and its anticipation affect a wide range of decisions. Job-seekers reject offers while waiting for an offer to match their best past offer; investors hold on to badly performing stocks; and managers throw good money after bad projects. We analyze behavior of a decision maker with regret preferences in a dynamic context and show that regret agents have a disposition to gamble until they receive a payoff matching the best past offer. Results from a lab experiment confirm that many subjects exhibit such behavior and are reluctant to stop below the past peak.

Date: 2021
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Working Paper: Too Proud to Stop: Regret in Dynamic Decisions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:19:y:2021:i:1:p:165-199.

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