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Microeconomics and Psychology

Author

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  • Steven Beckman
  • Lanxin Chen
  • Greg DeAngelo
  • W. James Smith
  • Xieting Zhang

Abstract

Psychologists such as the Nobel Prize--winner Daniel Kahneman challenge the major assumptions of microeconomics: the rational pursuit of self-interest given unchanging tastes. One may explore these issues through a questionnaire that may be distributed in class. How many of your students behave as the psychologists predict? Should economists adapt their theories of the market to reflect their findings? Prospect theory, changes in reference points, fairness, framing effects, loss aversion, the ultimatum game, herding, context dependence, the dictator game, preference reversals and the structure of the human brain are all illustrated through simple questions. The body of this article connects the questions to the literature and introduces the debates between economists and psychologists.

Suggested Citation

  • Steven Beckman & Lanxin Chen & Greg DeAngelo & W. James Smith & Xieting Zhang, 2011. "Microeconomics and Psychology," The Journal of Economic Education, Taylor & Francis Journals, vol. 42(3), pages 255-269, July.
  • Handle: RePEc:taf:jeduce:v:42:y:2011:i:3:p:255-269
    DOI: 10.1080/00220485.2011.581943
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    File URL: http://hdl.handle.net/10.1080/00220485.2011.581943
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    Cited by:

    1. Pedro Moreira, 2015. "The Perception of Economic Value Limits: A Study on the Ultimatum Game Decision Patterns," Proceedings of International Academic Conferences 2503337, International Institute of Social and Economic Sciences.

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