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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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  3. Folmer, Henk & Johansson-Stenman, Olof, 2011. "Does Environmental Economics Produce Aeroplanes Without Engines? - On the Need for an Environmental Social Science," Working Papers in Economics 483, University of Gothenburg, Department of Economics.
  4. Jeroen Hinloopen & Wieland Mueller & Hans-Theo Normann, 2011. "Output Commitment through Product Bundling: Experimental Evidence," Tinbergen Institute Discussion Papers 11-170/1, Tinbergen Institute, revised 14 Jul 2013.
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  6. 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.
  7. Luis Cabral, 2014. "We're Number 1: Price Wars for Market Share Leadership," Working Papers 14-01, New York University, Leonard N. Stern School of Business, Department of Economics.
  8. Ronald M. Harstad & Reinhard Selten, 2013. "Bounded-Rationality Models: Tasks to Become Intellectually Competitive," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 496-511, June.
  9. Le Coq, Chloé & Sturluson, Jon Thor, 2012. "Does opponents’ experience matter? Experimental evidence from a quantity precommitment game," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 265-277.
  10. Cardella, Eric & Chiu, Ray, 2012. "Stackelberg in the lab: The effect of group decision making and “Cooling-off” periods," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1070-1083.
  11. Vincent P. Crawford, 2013. "Boundedly Rational versus Optimization-Based Models of Strategic Thinking and Learning in Games," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 512-27, June.
  12. James Cooper & William Kovacic, 2012. "Behavioral economics: implications for regulatory behavior," Journal of Regulatory Economics, Springer, vol. 41(1), pages 41-58, February.

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