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Behavioral Economics

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  • Berg, Nathan

Abstract

This article describes the emerging subfield known as behavioral economics, which borrows from psychology, empirically tests assumptions used elsewhere in economics, and provides theories that aim to be more realistic and closely tied to experimental and field data. Highlights from the experimental findings of behavioral economics are discussed. The article remarks critically on the role of empirical realism and continued use of as-if methodology in behavioral economics. Problems in normative behavioral economics are given special attention as debates arise concerning how to interpret empirical findings that contradict standard definitions of axiomatic rationality. Ecological rationality, methodological pluralism, and Simon's notion of bounded rationality are considered.

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File URL: http://mpra.ub.uni-muenchen.de/26587/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26587.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:26587

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Related research

Keywords: bounded rationality; ecological rationality; Herbert Simon; as-if; survey;

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References

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  1. Floris Heukelom, 2007. "Kahneman and Tversky and the Origin of Behavioral Economics," Tinbergen Institute Discussion Papers 07-003/1, Tinbergen Institute.
  2. Gary Charness & Brit Grosskopf, 1999. "Relative payoffs and happiness: An experimental study," Economics Working Papers 436, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2000.
  3. Chris Starmer, 2005. "Normative notions in descriptive dialogues," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(2), pages 277-289.
  4. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
  5. Luigino Bruni & Robert Sugden, 2007. "The road not taken: how psychology was removed from economics, and how it might be brought back," Economic Journal, Royal Economic Society, vol. 117(516), pages 146-173, 01.
  6. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
  7. Chetan Dave & Catherine Eckel & Cathleen Johnson & Christian Rojas, 2010. "Eliciting risk preferences: When is simple better?," Journal of Risk and Uncertainty, Springer, vol. 41(3), pages 219-243, December.
  8. Carpenter, Jeffrey P. & Seki, Erika, 2005. "Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community," IZA Discussion Papers 1691, Institute for the Study of Labor (IZA).
  9. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-70, March.
  10. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  11. Charles R. Plott & Kathryn Zeiler, 2007. "Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?," American Economic Review, American Economic Association, vol. 97(4), pages 1449-1466, September.
  12. Catherine C. Eckel & Philip J. Grossman, 2002. "Sex Differences and Statistical Stereotyping in Attitudes Toward Financial Risk," Development Research Unit Working Paper Series archive-03, Monash University, Department of Economics.
  13. Berg, Nathan & Gigerenzer, Gerd, 2010. "As-if behavioral economics: Neoclassical economics in disguise?," MPRA Paper 26586, University Library of Munich, Germany.
  14. Carmon, Ziv & Ariely, Dan, 2000. " Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers," Journal of Consumer Research, University of Chicago Press, vol. 27(3), pages 360-70, December.
  15. Loewenstein, George & Thaler, Richard H, 1989. "Intertemporal Choice," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 181-93, Fall.
  16. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Development Research Unit Working Paper Series archive-01, Monash University, Department of Economics.
  17. Nathan Berg & Gerd Gigerenzer, 2007. "Psychology Implies Paternalism? Bounded Rationality may Reduce the Rationale to Regulate Risk-Taking," Social Choice and Welfare, Springer, vol. 28(2), pages 337-359, February.
  18. Simon, Herbert A, 1986. "Rationality in Psychology and Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages S209-24, October.
  19. Christine Jolls & Cass R. Sunstein, 2006. "Debiasing through Law," The Journal of Legal Studies, University of Chicago Press, vol. 35(1), pages 199-242, 01.
  20. Berg, Nathan & Eckel, Catherine & Johnson, Cathleen, 2010. "Inconsistency Pays?: Time-inconsistent subjects and EU violators earn more," MPRA Paper 26589, University Library of Munich, Germany.
  21. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
  22. Berg, Nathan, 2003. "Normative behavioral economics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 411-427, September.
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Citations

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Cited by:
  1. Paula-Elena Diacon, 2012. "The Economic Transition Of Romania From A Behavioural Economics Perspective," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4, pages 296-305, September.
  2. Lotz, Aïleen, 2011. "An Economic Approach to the Self : the Dual Agent," MPRA Paper 50771, University Library of Munich, Germany.
  3. Lotz, Aileen & Gosselin, Pierre, 2012. "A dynamic model of interactions between conscious and unconscious," MPRA Paper 36697, University Library of Munich, Germany.
  4. Clifton, Judith & Díaz-Fuentes, Daniel & Fernández Gutiérrez, Marcos & Revuelta, Julio, 2011. "Is Market-Oriented Reform Producing a “Two-Track” Europe? Evidence from Electricity and Telecommunications," MPRA Paper 33018, University Library of Munich, Germany.
  5. Flynn, Sean Masaki & Donnelly, Michael, 2012. "Does labor contract completeness drive unionization? Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 445-454.
  6. Berg, Nathan, 2014. "Success from satisficing and imitation: Entrepreneurs' location choice and implications of heuristics for local economic development," Journal of Business Research, Elsevier, vol. 67(8), pages 1700-1709.

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