Questions tagged [behavioral-economics]
A branch of economics that incorporates insights from psychology by allowing for systematic deviations from idealised rational behaviour.
112
questions
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3answers
89 views
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 ...
1
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1answer
64 views
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 ...
1
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0answers
53 views
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. ...
3
votes
0answers
27 views
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 ...
10
votes
3answers
157 views
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 ...
0
votes
0answers
17 views
Could Allais Paradox and similar experiments be harmonized with expected utility theory by noting additional counterparty risks?
My answers to the initial formulations of Allais Paradox are 1B and 2B, but only for setups where I have a high degree of confidence in the method of randomness being employed. In many if not most ...
7
votes
2answers
110 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 ...
0
votes
0answers
19 views
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-...
4
votes
1answer
126 views
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 ...
2
votes
1answer
122 views
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
...
5
votes
0answers
73 views
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) ...
3
votes
1answer
52 views
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 ...
2
votes
0answers
31 views
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 ...
1
vote
2answers
95 views
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 ...
2
votes
0answers
62 views
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 ...
1
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0answers
14 views
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.
.....
3
votes
1answer
43 views
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 ...
0
votes
1answer
55 views
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)....
1
vote
0answers
45 views
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 ...
2
votes
0answers
27 views
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 ...
1
vote
1answer
88 views
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 ...
1
vote
1answer
36 views
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?
3
votes
1answer
184 views
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 ...
1
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0answers
38 views
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 ...
3
votes
2answers
122 views
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 ...
0
votes
0answers
8 views
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
0
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1answer
40 views
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 ...
0
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0answers
24 views
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 ...
0
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0answers
31 views
To learn applied behavioural economics
Behavioural economics has offered many insights into decision-making processes, and experimentally, many cognitive biases have been identified, nudges have been tested etc. Reading all such literature,...
5
votes
1answer
80 views
What is a good handbook for behavioral economics?
I recently got interested in behavioral economics because it seems to have a lot of interesting applications in other fields such as macroeconomics. I managed to find a lot of interesting sources on ...
2
votes
1answer
43 views
Capital Recovery Factor for Hyperbolic Discounting
I'm looking for a closed-form capital recovery factor when hyperbolic discounting is used. The Wikipedia article on hyperbolic discounting has this formula for the "present value of a series of equal ...
1
vote
1answer
54 views
Is there any overlap between evolutionary and behavioral game theory
Evolutionary and Behavioral game theory are two different techniques. Both seem to be inspired from biology. So is there any overlap between their theory?
Are the two complementary to each other in ...
3
votes
0answers
69 views
Behavioral Dictator Game
I am doing a self study on behavioral economics and I am trying to solve behavioral version of the dictator game with following utilities for person 1 and 2.
$$ u_1( \sigma_1, \sigma_2 ) = \...
0
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3answers
63 views
person owns object, loses it and refuses to buy it the second time. Is it really an example of sunk cost fallacy?
I was traversing the web with examples about the sunk cost fallacy, and bumped into some example that a bit confuses me. The example is taken From here (https://market.subwiki.org/wiki/...
4
votes
1answer
107 views
Name of example of irrationality of proportional and absolute cost
I am trying to give a puzzle from behavioral economics illustrating on the irrationality of thinking of costs in proportional rather than absolute terms. I remembered vaguely an example like this but ...
1
vote
1answer
68 views
Framing Effect Risk-Aversion Risk-Pursuit
I am an economics' graduate seeking to study Law and I want to illustrate the importance of legal certainty. Penalties, Costs are negativelly framed.
I am trying to word.
200 dollars with 50% ...
7
votes
2answers
160 views
What do game theorists think of behavioural economics?
Though behavioural economics has been popularized over the past decade in both industry and pop culture, it seems that not much has changed with regard to the standard economic definition of ...
1
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0answers
18 views
Do you know any paper that discuss the effect of the deterrence of fines of individuals' behaviours? What is the difference between a fine a fee?
According to Gneezy and Rustichini the presence of an extrinsic reward in activities with a level of intrinsic motivation (e.g. volunteering) reduces intrinsic motivation, thus it may determine ...
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0answers
24 views
What experiment could I run in order to test the 'Independence of Irrelevant Alternatives' axiom?
I need some help in designing an economics experiment to test the IIA axiom. My understanding of it is if you rank A above B then if you introduce C or D, you must still always rank A above B in any ...
0
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1answer
58 views
Is truth cheap, and falsehood expensive and volatile? [closed]
Question:
In a scenario where data is bought and sold in a double-auction market, will the trading price and volatility of a given piece of data become inversely proportional to its accuracy over ...
0
votes
1answer
5k views
The beta delta model
What is the $\beta$-$\delta$ model? How does it relate to present bias and the present value calculation?
2
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0answers
39 views
Dominated lotteries in CPE
I have been looking into expectation-based loss aversion following Kőszegi-Rabin (2005, 2007). In particular, I find their choice-acclimating personal equilibrium (CPE) interesting, but it has a ...
1
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0answers
104 views
Calculate power for multiple rounds of public goods experiment
I would like to calculate/simulate the a-priori necessary sample size for a repeated public goods experiment.
$N$ Participants play $R$ rounds of a public goods game (linear, voluntary contribution ...
1
vote
1answer
57 views
Sunk cost fallacy- is it a bug or a feature?
I was having a conversation with a colleague regarding sunk costs, and discussion came up that the appeal of falling for the sunk cost fallacy might be a feature rather than a flaw, as it is behavior ...
8
votes
1answer
204 views
Kőszegi - Rabin (2006) model problem
First of all, that's a homework question, and I will try to make it as useful to future readers as possible.
Problem
So, I was given a problem about the model described by Botond Kőszegi and ...
2
votes
0answers
30 views
Are there any experiments about financial games with just one player?
I was wondering if there are any experiments of financial games (laboratory games under controlled circumstances like Plott and Sunder's Rational Expectations and the Aggregation of Diverse ...
-2
votes
1answer
59 views
Beta delta Agent - Consumption decision
I’m struggling with a problem regarding the beta delta agent.
Can someone give me a hint how I can come up with the levels of utility?
Thanks in advance!
0
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1answer
76 views
What is the best example social norm effect economy?
Here is my example.
I read the paper called "Social norms and Energy Conservation" (2010) by Hunt Allcott, about the energy conservation of households by providing them with the amount of energy ...
0
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1answer
98 views
What economics theory explains changes in purchasing different types of goods?
I am thinking about the first of the month. I spend more of my money on superior goods and, because of that decision, less on normal and inferior goods. Are income and substitution effects enough to ...
7
votes
2answers
109 views
Do people really care about higher moments?
I have heard that people often handle uncertainty using point estimates not probability distributions. However, I have been unable to find any evidence for this in the heuristics and biases literature....