OPTIMAL STOPPING IN A DYNAMIC SALIENCE MODEL

We study dynamic choice under risk through the lens of salience theory. We derive predictions on salient thinkers' gambling decisions and strategy choices. We test our model experimentally and find support for all of our predictions. We also detect a strong correlation between static and dynami...

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Bibliographic Details
Published in:International economic review (Philadelphia) 2024-05, Vol.65 (2), p.885-913
Main Authors: Dertwinkel‐Kalt, Markus, Frey, Jonas
Format: Article
Language:English
Subjects:
Gambling
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Summary:We study dynamic choice under risk through the lens of salience theory. We derive predictions on salient thinkers' gambling decisions and strategy choices. We test our model experimentally and find support for all of our predictions. We also detect a strong correlation between static and dynamic choices, suggesting that salience theory can coherently explain risky choice in both static and dynamic contexts. Our results help to understand when people sell assets, stop gambling, enter the job market, or retire.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12681