Friday, 27 April, 2018 | 14:00 | Micro Theory Research Seminar

Larbi Alaoui, Ph.D. (UPF Barcelona) “Know When to Fold 'Em: The Grit Factor”

Larbi Alaoui, Ph.D.

Universitat Pompeu Fabra, Barcelona, Spain

Authors: Larbi Alaoui and Christian Fons-Rosen

Abstract: This paper investigates the way different sides of grit influence behavior. In addition to grit's upside in achieving economic success associated with not giving up, it might also have a downside associated with not letting go.  We provide a stylized model that illustrates this potential downside. We split grit into two new categories, tenacity and diligence, and hypothesize that tenacity can lead individuals to go beyond their own intended plan of action when making a loss. We test the predictions with an experiment that elicits each individual's plan of action which we compare to actual choice in a game of luck. Consistent with our priors, grittier individuals have a higher tendency to overplay, and tenacity alone captures the difficulty in respecting ex-ante preferences when this means accepting defeat. We then discuss the external validity of our findings.

Keywords: noncognitive skills; grit; tenacity; diligence

JEL codes: C91; D03; I20

Full Text:  “Know When to Fold 'Em: The Grit Factor”