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Optimal Stopping In A Dynamic Salience Model

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  • Markus Dertwinkel‐Kalt
  • Jonas Frey

Abstract

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.

Suggested Citation

  • Markus Dertwinkel‐Kalt & Jonas Frey, 2024. "Optimal Stopping In A Dynamic Salience Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 885-913, May.
    • Handle: RePEc:wly:iecrev:v:65:y:2024:i:2:p:885-913
    DOI: 10.1111/iere.12681
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    References listed on IDEAS

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