Theoretical Economics
Journal of the Econometric Society
Edited by: Federico Echenique • ISSN (e): 1555-7561 • ISSN (print): 1933-6837
Edited by: Federico Echenique • ISSN (e): 1555-7561 • ISSN (print): 1933-6837
Theoretical Economics: Sep, 2007, Volume 2, Issue 3
p. 231-259
Larry G. Epstein, Igor Kopylov
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.