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An axiomatic model of 'cold feet'

Larry Epstein and Igor Kopylov

No 533, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: Individuals often lose confidence in their prospects as they approach the "moment of truth." An axiomatic model of such individuals is provided. The model adapts and extends (by relaxing the Independence axiom) Gul and Pesendorfer's model of temptation and self-control to capture an individual who changes her beliefs so as to become more pessimistic as payoff time approaches. In a variation of the model, the individual becomes more optimistic at an ex post stage in order to feel better about her available options.

Keywords: pessimism; optimism; cold feet; temptation; self-control; moment of truth; temporal proximity; confidence (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-01
New Economics Papers: this item is included in nep-cbe
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Citations: View citations in EconPapers (9)

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