IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v115y2025i1p330-63.html
   My bibliography  Save this article

Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field

Author

Listed:
  • Rawley Heimer
  • Zwetelina Iliewa
  • Alex Imas
  • Martin Weber

Abstract

We document a robust dynamic inconsistency in risky choice. Using a unique brokerage dataset and a series of experiments, we compare people's initial risk-taking plans to their subsequent decisions. Across settings, people accept risk as part of a loss-exit strategy—planning to continue taking risk after gains and stopping after losses. Actual behavior deviates from initial strategies by cutting gains early and chasing losses. More people accept risk when offered a commitment to their initial strategy. Our results help reconcile seemingly contradictory findings on risk-taking in static versus dynamic contexts. We explore implications for theory and welfare.

Suggested Citation

  • Rawley Heimer & Zwetelina Iliewa & Alex Imas & Martin Weber, 2025. "Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field," American Economic Review, American Economic Association, vol. 115(1), pages 330-363, January.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:1:p:330-63
    DOI: 10.1257/aer.20210307
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20210307
    Download Restriction: no
    File URL: https://doi.org/10.3886/E199282V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20210307.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20210307.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/aer.20210307?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:115:y:2025:i:1:p:330-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.