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Markets and Manipulation: Time for a Paradigm Shift?

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  • Kaushik Basu

Abstract

There is a growing appreciation in economics that people have emotional vulnerabilities, commitments to social norms, and systematic irrationalities that impact their decision making and choice in the market place. The flip side of this is that human beings are susceptible to being manipulated by unscrupulous agents single-minded about marketing their services and wares. This paper reviews George Akerlof and Robert Shiller's Phishing for Phools: The Economics of Manipulation and Deception, alongside other writings in the field, and discusses how this research agenda can be taken forward. The paper shows how this new research can shed light on the ubiquity of corruption in so many societies, and proposes ideas for controlling corruption.

Suggested Citation

  • Kaushik Basu, 2018. "Markets and Manipulation: Time for a Paradigm Shift?," Journal of Economic Literature, American Economic Association, vol. 56(1), pages 185-205, March.
  • Handle: RePEc:aea:jeclit:v:56:y:2018:i:1:p:185-205
    Note: DOI: 10.1257/jel.20161410
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    References listed on IDEAS

    as
    1. Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-671, October.
    2. Ispano, Alessandro & Schwardmann, Peter, 2017. "Cooperating over losses and competing over gains: A social dilemma experiment," Games and Economic Behavior, Elsevier, vol. 105(C), pages 329-348.
    3. Basu, Karna, 2014. "Commitment savings in informal banking markets," Journal of Development Economics, Elsevier, vol. 107(C), pages 97-111.
    4. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
    5. Hoff, Karla & Pandey, Priyanka, 2014. "Making up people—The effect of identity on performance in a modernizing society," Journal of Development Economics, Elsevier, vol. 106(C), pages 118-131.
    6. John Ifcher & Homa Zarghamee, 2011. "Happiness and Time Preference: The Effect of Positive Affect in a Random-Assignment Experiment," American Economic Review, American Economic Association, vol. 101(7), pages 3109-3129, December.
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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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