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Behavioral economics as applied to firms: a primer

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  • Armstrong, Mark
  • Huck, Steffen

Abstract

We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behavior 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 University Library of Munich, Germany in its series MPRA Paper with number 20356.

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Date of creation: Jan 2010
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Handle: RePEc:pra:mprapa:20356

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Keywords: Behavioral economics; bounded rationality; experimental economics; oligopoly; antitrust;

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  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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