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Behavioral Economics as Applied to Firms: A Primer

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  • Mark Armstrong
  • Steffen Huck

Abstract

We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behaviour in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers, the benefits of employing managers whose objective diverges from profit-maximization (including managers who are overconfident or base pricing decisions on sunk costs), the impact of social preferences on the ability to collude, and the incentive for profit-maximizing firms to mimic irrational behavior.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2937.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_2937

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Keywords: behavioral economics; firms; oligopoly; bounded rationality; collusion;

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Behavioral economics as applied to firms: a primer
    by Miguel in Simoleon Sense on 2010-07-11 00:16:41
  2. Behavioural Economics Applied to FIRMS
    by Liam Delaney in Geary Behaviour Centre on 2010-07-07 09:57:00
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  3. Kyle Hampton & Katerina Sherstyuk, 2010. "Demand Shocks, Capacity Coordination and Industry Performance: Lessons from Economic Laboratory," Working Papers 2010-09, University of Alaska Anchorage, Department of Economics.
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  5. R. M. Harstad & R. Selten., 2014. "Bounded-Rationality Models: Tasks to Become Intellectually Competitive," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
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  10. V. P. Crawford., 2014. "Boundedly Rational versus Optimization-Based Models of Strategic Thinking and Learning in Games," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
  11. S.N. O'Higgins & Arturo Palomba & Patrizia Sbriglia, 2010. "Second Mover Advantage and Bertrand Dynamic Competition: An Experiment," Labsi Experimental Economics Laboratory University of Siena, University of Siena 028, University of Siena.
  12. Cardella, Eric & Chiu, Ray, 2012. "Stackelberg in the lab: The effect of group decision making and “Cooling-off” periods," Journal of Economic Psychology, Elsevier, Elsevier, vol. 33(6), pages 1070-1083.

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