Sunday, March 25, 2012

Rational Guilt

People who think a lot of how other people view them sometimes avoid making decision because that decision may incur guilt. Even they know the right decision to make, that procrastinate making it. That's the power of guilt.

Making decision right away beget expected guilt high enough that the cost at the present moment outweighs current benefit of making decision. But in the long run, the total benefit overwhelms the cost of guilt and procrastination. So the 'super ego' who maximizes the long run payoff would always make decision right away. The negative externality inherent in the principle-agent problem preclude making immediate decision.

It is the same case if the person may experience regret.

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