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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Decreasing performance pay in the risk-aversion of the principal
What is the intuition behind a decreasing performance pay ß if both principal and agent are risk averse compared to a principal being risk neutral and an agent being risk averse?
Actually, intuitively ...
3
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1answer
41 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 ...
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30 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
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2answers
106 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 ...
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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
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1answer
35 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 ...
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15 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 ...
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0answers
26 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,...
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1answer
50 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 ...
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0answers
12 views
Welfare Effects of Sophistication vs Naiveté on Present Bias
In lecture, we said that naive agents are better off than sophisticated agents in situations with current costs and future benefits, such as quitting smoking, while sophisticated agents are better off ...
2
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1answer
32 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
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1answer
40 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 ...
2
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0answers
43 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 ) = \...
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3answers
59 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/...
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1answer
93 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
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1answer
63 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% ...
2
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0answers
46 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 ...
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0answers
18 views
The Econometrics of Pay-To-Play In Youth Sports
Question: Are there any econometric theories that are applicable in studying what is commonly referred to as Pay-To-Play, in the world of youth sports.
I want to preface by stating that I am not an ...
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0answers
17 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
22 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 ...
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1answer
57 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 ...
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1answer
2k views
The beta delta model
What is the $\beta$-$\delta$ model? How does it relate to present bias and the present value calculation?
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0answers
21 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 ...
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0answers
49 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 ...
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1answer
51 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
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1answer
149 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
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0answers
24 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 ...
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1answer
53 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!
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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
95 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
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2answers
100 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....
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0answers
45 views
Behavioral game theory for elections process with two candidates
I'm looking for resources and explanations about a game that would explain what two candidates should expect from an election process?
Example : Should they reveal their program first or second?
...
1
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1answer
59 views
Luce Choice Axiom, Quantal Response Equilibrium
How is the Quantal response equilibrium model influenced by the Luce choice axiom since Quantal Response equilibrium takes into account the rationality parameter ß and I dont see the mention of ...
4
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1answer
161 views
Bounded rationality with Quantal Response Equilibrium model for an Extensive Form game
I am working on my Master thesis based on bounded rationality in behavioral game theory models, I wanted to know if QRE(Quantal Response Equilibrium) can be applied to games where players have ...
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References? — Coordination Between Groups
Can anyone provide references for research that focuses on coordination between groups of decision makers rather than within group coordination with individual decision makers? \
Edits given the ...
0
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1answer
70 views
Has any person ever actually planned his or her consumption according to Modigliani’s LCH?
https://en.wikipedia.org/wiki/Life-cycle_hypothesis?wprov=sfti1
It seems self-evident to me that nobody on Earth actually does this. Real people are short-sighted, undisciplined, and lack the ...
3
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1answer
78 views
Entrepreneurs and risk aversion
The are various opinion whether entrepreneurs are more or less risk-averse than the general population. The commonly held belief is that they are less so, but the contrary opinion exists as well. ...
3
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1answer
755 views
Game theory with rational and irrational players
Are there game theoretic models where one player is rational and the other is irrational (i.e., plays with behavioral limitations)?
The motivation for this question is that behavioral economics has ...
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0answers
43 views
«Behavioural economics is also useful in macroeconomics»
In this VOXEU article, the authors talk about a model in which behaviour economics is applied to macroeconomics.
I'm trying to understand fig.1, and the following sentence: «This means that if the ...
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3answers
85 views
The right term for a market that tends towards consumers switching suppliers freely
Say there's a bunch of competing businesses, car repair shops for example, in a certain market. Business is good and there's a substantial average turnaround time for all of them. Someone decides they'...
5
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0answers
266 views
Fact-checking Dan Ariely (2008) on Duke basketball tickets story
In Predictably Irrational (2008, pp. 127-133), Dan Ariely describes the Krzyzewskiville phenomenon (Duke students camp for weeks to get basketball tickets), and how he and Ziv Camron used it to study ...
3
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1answer
96 views
Was there resistance, historically, to the idea that human behavior deviates from rational decision making theory?
I have edited this question considerably to narrow the focus.
A recent New York Times article was published on the Nobel Prize for Economics. The article discusses that Nobel laureate Richard Thaler ...
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Was the Concorde project an example of the sunk-cost fallacy?
The sunk-cost fallacy has also been dubbed the Concorde Fallacy.
Examples of the Concorde Fallacy in the academic literature and beyond
I believe Dawkins and Carlisle (1976) were the first to use ...
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2answers
67 views
Concept for “when a mechanism exists which can be exploited, people will exploit it”
I dimly recall a concept, I think defined by an economist, although I cannot remember the details or context. I think an example--apocryphal or not--was welfare recipients who would have more ...
2
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1answer
52 views
Looking for an article in Behavioral Economics about Inequality
I have been searching for an article that I know exists, but somehow am unable to find.
The article is about an economic game where participants are assigned to a group, and can observe how much ...
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5answers
7k views
Should I stay or should I quit?
Is there an economic theory of quitting an activity? A theory that weighs the investment costs put into something and the opportunity costs of pursuing it.
I am aware of Fershtman and Gneezy ...
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0answers
46 views
Terminology for separability in price and value
Take an agent with mean-variance utility over something that is uncertain:
$$
U(x) = \mu_x^\theta - \sigma_x^\lambda
$$
$A\in \{0,1\}$ happens if $U(x)>0$, and $x$ is a random variable
$$
A = \...
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0answers
13 views
Origin of “enforcement is only effective in the presence of the enforcer?” [closed]
If this question is off-topic, my apologies. It seems borderline to me.
I have had several people tell me (without reference) this idea that:
Enforcement is ineffective because enforcement will ...
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2answers
38 views
How long do stock markets usually take to process complex new public information?
Here is a question that I've been thinking about for a while:
Theoretically, assuming investors are rational, a stock's price will be equal to its its intrinsic value (present value of discounted ...
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4answers
179 views
Examples of behavioural breakdowns in game theory?
I'm trying to compile multiple scenarios of the breakdown of game theory. Specifically, I'm looking for scenarios where game theory predicts certain behaviours, but in real-world scenarios or ...
