A Theory of Ex Post Rationalization

People rationalize their past choices, even those that were mistakes in hindsight. We propose a formal theory of this behavior. The theory predicts that sunk costs affect later choices. Its model primitives are identified by choice behavior and it yields tractable comparative statics.

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Bibliographic Details
Published inarXiv.org
Main Authors Eyster, Erik, Li, Shengwu, Ridout, Sarah
Format Paper
LanguageEnglish
Published Ithaca Cornell University Library, arXiv.org 18.03.2022
Subjects
Sunk cost fallacy
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Summary:People rationalize their past choices, even those that were mistakes in hindsight. We propose a formal theory of this behavior. The theory predicts that sunk costs affect later choices. Its model primitives are identified by choice behavior and it yields tractable comparative statics.
ISSN:2331-8422