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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16 views

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 ...
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54 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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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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107 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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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 ...
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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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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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52 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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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 ...
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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 ...
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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 ...
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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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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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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 ...
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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% ...
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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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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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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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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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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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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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51 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 ...
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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 ...
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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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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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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 ...
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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 ...
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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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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? ...
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63 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 ...
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1answer
163 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 ...
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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 ...
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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. ...
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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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«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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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'...
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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 ...
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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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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 ...
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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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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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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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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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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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180 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 ...
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Looking for behavioral economics research about the redemption of gift cards

This is a long shot! I was wondering if anyone could point me to any behavioral economics or other economics research on perceived value, specifically I'm looking at why some people don't redeem ...