Questions tagged [behavioral-economics]

A branch of economics that incorporates insights from psychology by allowing for systematic deviations from idealised rational behaviour.

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What stops the pay-what-you-want pricing strategy from being more popular?

The challenges or weaknesses that this strategy faces From Pay what you want - Wikipedia: Pay what you want (or PWYW, also referred to as value-for-value model is a pricing strategy where buyers pay ...
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Ultimatum game where fair offers are automatically accepted

Has there been any experiments with a variant of the Ultimatum Game where a fair offer is automatically accepted? For example, the game below, where rule 2 has been added to the classic ultimatum game:...
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Transitivity of Preferences paper

I am going through some of my old grad school notes, and in my microeconomics notes on transitive preferences, the teacher made a note of a behavioral economics result where when presented with two ...
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How do I calculate total utility under discounted utility framework

Suppose we are given an instantaneous utility function and discounted rate with budget constraint. Using the exponentially discounted utility function, we can find the optimal consumption stream of a ...
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Experiments on expectations formation

I was reading about the debate between rational expectations and adaptive expectations in some intermediate macro notes. One of the arguments given to discard the adaptive expectations hypothesis drew ...
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Estimation of learning model with finite horizon forward-looking individuals

I am stuck with the estimation of learning model where individuals are forward-looking in a finite horizon. Specially, a user is watching a TV program containing many episodes, and he doesn't know the ...
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White Flight from Asian Immigration: Evidence from California Public Schools - is the methodology robust?

White Flight from Asian Immigration: Evidence from California Public Schools https://www.nber.org/papers/w31434 suggests that "as Asian students arrive, white student enrollment declines in ...
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Question about table in Credit Lines as Insurance: Evidence from Bangladesh

I am reading a paper for a seminar, titled "Credit Lines as Insurance: Evidence from Bangladesh" authored by Gregory Lane. In there, he describes part of his result refering to a table with ...
JohnBlue's user avatar
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Nash equilibrium in p-beauty contest game where p=1

Setup: players must chose a number between 0 and 100. The winner of the game is the player whose chosen number is closest to the average of all chosen numbers multiplied by "p". Assume that ...
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Mechanism Design with Quantal Best Response

I was wondering if there is a sensible definition of mechanism design (incentive compatibility and individual rationality) when the agent (bidder) is only boundedly rational. In the classical ...
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'Accuracy' of a Signal

I am trying to understand a line in the paper titled "Reference Dependent Consumption Plans" written by Matthew Rabin and Botond Koszegi, and published in the American Economic Review, Vol ...
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Multi-Stage Voting Game in zTree

For a project that I am doing, I need to code up a mulit-stage voting game in zTree. I have never used the program before but I am slowly teaching myself through watching videos and reading manuals. ...
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What is the difference between the cognitive hierarchies and level k model?

Both these models are hierarchical models of strategic behaviour, where the k'th level plays a best response to the earlier levels. What exactly is the difference, mathematically? A precise definition ...
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Limit of Certainty Equivalent for Cumulative Prospect Theory

I found a piece of code from a former colleague who seems to have copied it from another source (perhaps internet) that confused me a bit. Therein, the Certainty Equivalent (CE henceforth) for ...
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Von Neumann-Morgenstern Utility Theory Question

There's a question in my ECON notes that I don't understand, any help would be greatly appreciated. Here are the definitions used about VNM Utility Theory. The question is posted after the definitions....
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What mathematical rule might eliminate .99 pricing?

What mathematical rule would effectively eliminate .99 pricing? MOTIVATION In the year 2013, the government of Canada stopped minting pennies Suppose that the United States government wanted to ...
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Does envy and identity fall under "social preferences"?

Social preferences refer to concepts such as reciprocatory, altruism, fairness and inequity aversion, as outlined in Fehr & Fischbacher (2002) and here. Does greed or envy fall under "social ...
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Do economics (as a science) provide any hints on how games with none/multiple NEs will be played in real life?

Let's consider a simple non-cooperative one period game. Let's note that it is relatively easy to run an experiment which will very closely reproduce the theoretical model (e.g. unfamiliar people are ...
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How are these examples irrational?

I am reading A Course in Behavioral Economics third edtion written by Erik Angner. I am struggling with page 30, exercise 2.40: Exercise 2.40 Irrationality Explain (in words) why each of the ...
martinrhan's user avatar
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How much do second-hand good purchases affect first-hand demand?

For the purpose of this question, I'm only interested in relatively cheap goods (clothing, appliances, furniture, phones), not extremely substantial purchases like cars or houses. Proceeding from ...
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Does the choice of rating scale affect the average percentage score?

Are there any differences in average percentage score when people are asked to judge things on different scales? Like for example rating something on 0/100 scale or a 0/5 scale or 0/10. Do different ...
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How to measure mental accounts of an individual?

I wonder whether its possible to identify mental accounts as defined by Richard Thaler https://www.jstor.org/stable/183904 given i observe consumption and/ or investment behavior of an individual? I ...
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How to measure utility functions in the stock market

i am looking for some articles on how to identify and estimate utility functions in the stock market. My own search results yielded some papers by Blackburn and Ukhov https://www.researchgate.net/...
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Expectation VS forecast

I'm confused at the difference between the 'expectation' and 'forecast'. In behavioral economics, forecast bias is defined as the difference between expectation and forecast. However both sound pretty ...
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What is the main reason behind the study of Neo-classical economics, instead of behavioural economics?

In the courses, we are taught economics theoretically,inclusive of assumptions,simplicity and inferences based on the optimal thinking. But, later on we see that most of the theories and hypothesis ...
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Utility of both players in St. Petersbourg paradox - behavioural economics

Im reading a paper by Karl Menger [1] about the St. Peterbourg paradox : In the theory of probability, the "Petersburg Game" designates the follow- ing gamei between two persons, A and B. ...
user305883's user avatar
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How many utility functions can a person have?

Classical choice theory assumes that each person has a utility function, and chooses from each set of options an option that maximizes this utility. There are many empirical studies that refute this ...
Erel Segal-Halevi's user avatar
10 votes
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Do a group of economic agents really act as if they are rational?

When questioning the rational choice hypothesis, I often get responses that are similar to the followings: "Individuals may sometimes make irrational decisions, but a large group of economic ...
user141240's user avatar
7 votes
2 answers
166 views

Are there any behavioral macro models with rigorous micro-foundations?

I am looking for some paper that tries to establish rigorous micro-foundations the behavioral New Keynesian (or any other) macro models. This is surprisingly hard, most work on this topic (like De ...
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Whether companies and consumers are in-group and out-group in misperception?

Bursztyn (2021) says that Misperceptions about others are widespread, asymmetric, much larger when about out-group members, and positively associated with one’s own attitudes. Some examples of in-...
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Is there any example for "pluralistic ignorance" in economics?

Today I read a paper recently written by Bursztyn, 2021 saying that The origin, persistence, and rigidity of misperceptions about others can in principle be explained by different conceptual ...
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Is there any overlap between Rawlsian approach and uncertainty avoidance?

From the definition of the Rawlsian approach The Rawlsian approach to social welfare, built on the foundation of the “veil of ignorance” (Rawls, 1999, p. 118) where "veil of ignorance" is ...
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In experiments of 2-by-2 games where the dominant action benefits both players, do people frequently choose the other action?

Sayers et al look in Some descriptive aspects of two-person non-zero-sum games at variations of the prisoner dilemma. They had two participants (α and β) pressing press either a black (1) or a red (2) ...
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What cognitive biases reduce savings?

In Thinking Fast and Slow Kahneman explains that people can sometimes save less because they underestimate the future benefit to themselves because they view present and future self differently. I ...
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Hyperbolic Discount function

I'm trying to determine my hyperbolic discount function for a given set of my own time preferences. I have determined that I am indifferent between {$}1000 today and {$}1004 tomorrow; {$}1000 today ...
CorporateNationalism's user avatar
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Does elasticity make sense for different levels of prices? If not, how can we fix that?

Let's say we know that our customers can't make sense of a raise in 5% of the price. It's too little for them to notice. However, an increase above 10% is easily noticed. If this is true, different ...
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What is the significance of the findings in Nagel's 1995 paper on Learning Theory?

This post concerns the findings in Nagel (1995). It is a bit outdated but nevertheless still relevant. She examines the Guessing Game, and how individual study-subjects behave in repeated games. In ...
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As a (micro) behavioral economist looking for a faculty job, how should I present my research approach/skill set? [closed]

I am asking as someone who has applied behavioral econ theory to design lab experiments and a couple field experiments. I notice that there is a bias against experiment-based research on the market. .....
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3 votes
1 answer
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Gamification and incentives

Is there any (theoretical?) work on "gamification" in game theory? I do not have a proper definition of gamification, but StackExchange would be an example. Contributers like us provide a ...
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Finding Nash Equilibrium

Where would the Nash equilibrium lie in the pictured scenario? Whats confusing me is that both persons best response changes depending on the choice of the other person (there is no dominant strategy)....
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Estimating $\tau$ (cognitive hierarchy)

I am a little confused about how the parameter $\tau$ is usually estimated in a cognitive hierarchy model (recall that $\tau$ is the mean number of 'thinking steps'). For example, suppose that ...
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Intuition on cumulative prospect theory, based on equi-probable outcomes?

I am trying to build my intuition on the weighting/decision function in cumulative prospect theory. I have a hard time getting a clear picture for even the simple case of equi-probabilities. Assume ...
Matifou's user avatar
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1 answer
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Help finding the right term - Behavioural Finance / Pricing jargon

There is a phenomenon used in Economics(?)/Marketing/Pricing/Psychology when selecting the right price for your product. Within a certain price range, the customer is insensitive to changes in the ...
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noise traders in neo-classical economics vs behavioural economics

Does neoclassical economics/finance exclude the existence of noise traders (as a contrast to rational traders)? Or do neoclassical models also sometimes accept the existence of noise traders?
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Should the "value function" be "utility function" in prospect theory?

I have a background in mathematics rather than economics, and currently reading Choices, Values, and Frames[1]. The paper defines a "hypothetical value function" (the s-shape that is concave ...
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Term for risk AND ambiguity

This question is related to References for particular definitions of risk and uncertainty, which offers an excellent description of risk and uncertainty. Just as a recap: Knight (1921) described risk ...
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2 answers
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Additional components in utility functions (behavioral economics)

I am looking for a term describing the second part of a utility function in behavioral economics and related disciplines. For example, Thaler (1983) describes a utility function that could be ...
Karl A's user avatar
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How does interest rates impact investment

How does a decrease in interest rates decrease investment rates? This is how I believe a liquidity trap works, not sure if it is correct. Thank you
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Specification of the parameters of this utility function [Behavioral Economics]

This is from page 274 of "Advances in Behavioural Economics" by Camerer, Rabin, Loewenstein. This chapter of the book is entitled "A theory about fairness, competition, and cooperation". I have ...
TheLight OI's user avatar
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Analytically solvable examples of quantal response equilibrium

I have been reading up on quantal response equilibrium and am looking for some simple examples which can be solved analytically (in order to gain some intuition about how exactly QRE works). To be ...
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