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Aspiration Traps

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  • Aviad Heifetz
  • Enrico Minelli

Abstract

Fundamental choices, like location or education, affect the attitudes and beliefs with which the individual will analyze future day to day decision problems. These effects cannot be assumed to be transparent to the individual. To restore methodological discipline in the analysis of such choices, we propose a solution concept based on an idea of consistency: the individual should not regret her fundamental choices after her preferences and beliefs have adjusted thereof. We show that even single person decision problems admit multiple, Pareto-ranked solutions: the individual might be stuck in an aspiration trap.

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Bibliographic Info

Paper provided by University of Brescia, Department of Economics in its series Working Papers with number ubs0610.

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Date of creation: 2006
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Handle: RePEc:ubs:wpaper:ubs0610

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  1. Markus K. Brunnermeier & Jonathan A. Parker, 2005. "Optimal Expectations," American Economic Review, American Economic Association, vol. 95(4), pages 1092-1118, September.
  2. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
  3. Truman F. Bewley, 1999. "Work Motivation," Cowles Foundation Discussion Papers 1209, Cowles Foundation for Research in Economics, Yale University.
  4. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
  5. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  6. Anat Bracha, 2004. "Affective Decision Making in Insurance Markets," Yale School of Management Working Papers amz2665, Yale School of Management, revised 01 Sep 2004.
  7. Samuelson, Larry, 2001. "Introduction to the Evolution of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 225-230, April.
  8. Truman Bewley, 1999. "Work motivation," Review, Federal Reserve Bank of St. Louis, issue May, pages 35-49.
  9. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
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