- Emotions and Decision-Making
- Dynamic Choice
- Axiomatic Behavioural Economics
Disappointment, Risk Aversion and Dynamic Depletion of Self-Control (draft coming soon)
- Abstract: Research in psychology and neuroscience provides compelling evidence that negative emotions hinder individuals' ability to exert self-control. Similarly, a growing body of empirical research in economics suggests that poverty can induce negative emotional states, which generate behaviours that perpetuate it. This paper introduces a history-dependent model of dynamic choice which incorporates considerations of how emotional distress induces more stringent internal conflicts in the future. From a decision-theoretic perspective, the way we incorporate emotions necessitates relaxing the von Neumann-Morgenstern independence axiom and introducing revised versions of classical axioms of dynamic choice. In terms of choice behaviour, our agent doesn't only dislike risk by her pure risk aversion, but also because it can deplete self-control in subsequent choices. This will lead agents to avoid temptations dynamically: even when not tempted, they will like to abstain from contingencies that cause emotional distress, and hence normatively inferior future choices. With only one additional parameter, our model rationalises choices that may appear to violate stochastic dominance.
Work in Progress
- Partition Dependent Expected Utility (with Nick Scholz)
- Consequentialist Foundations of Recursive Expected Utility (with Peter J. Hammond)