An Introduction to Behavioral Economics

Description

The third edition of this successful textbook is a comprehensive, rigorous survey of the major topics in the field of behavioral economics. Building on the strengths of the second edition, it offers an up-to-date and critical examination of the latest literature, research, developments and debates in the field. Offering an inter-disciplinary approach, the authors incorporate psychology, evolutionary biology and neuroscience into the discussions. And, ultimately, they consider what it means to be 'rational', why we so often indulge in 'irrational' and self-harming behavior, and also why 'irrational' behavior can sometimes serve us well. A perfect book for economics students studying behavioural economics at higher undergraduate level or Master's level. This new edition features: - Extended material on heuristics and biases, and new material on neuroeconomics and its applications - A wealth of new topical case studies, such as voting behavior in Brexit and the Trump election and the current obesity epidemic - More examples and review questions to help cement understanding Cover Detailed Table of Contents List of Figures List of Tables Preface Acknowledgments PART I Introduction CHAPTER 1 Nature of Behavioral Economics 1.1 Behavioral economics and the standard model 1.2 History and evolution of behavioral economics 1.3 Relationship with other disciplines 1.4 Objectives, scope and structure 1.5 Summary 1.6 Review questions 1.7 Applications CHAPTER 2 Methodology 2.1 Theories 2.2 Evidence 2.3 Consilience 2.4 Summary 2.5 Review questions 2.6 Applications PART II Foundations CHAPTER 3 Values, Preferences and Choices 3.1 The neoclassical model 3.2 Axioms, assumptions and definitions 3.3 The evolutionary biology of utility 3.4 The neuroscientific basis of utility 3.5 Broadening rationality 3.6 Visceral factors 3.7 Types of utility 3.8 Policy implications 3.9 Summary 3.10 Review questions 3.11 Applications CHAPTER 4 Beliefs and Expectations 4.1 The neoclassical model 4.2 Probability estimation 4.3 Self-evaluation bias 4.4 Magical beliefs 4.5 Causes of irrationality 4.6 Summary 4.7 Review questions 4.8 Review problems 4.9 Applications CHAPTER 5 Decision-making under Risk and Uncertainty 5.1 Background 5.2 Conventional approaches to modifying expected utility theory 5.3 Prospect theory 5.4 Reference points 5.5 Loss-aversion 5.6 Shape of the utility function 5.7 Decision-weighting 5.8 Criticisms of prospect theory 5.9 Recent theories and conclusions 5.10 Summary 5.11 Review questions 5.12 Review problems 5.13 Applications CHAPTER 6 Mental Accounting 6.1 Nature and components of mental accounting 6.2 Framing and editing 6.3 Budgeting and fungibility 6.4 Choice bracketing and dynamics 6.5 Policy implications 6.6 Summary 6.7 Review questions 6.8 Applications PART III Intertemporal Choice CHAPTER 7 The Discounted Utility Model 7.1 Introduction 7.2 Origins of the discounted utility model 7.3 Features of the discounted utility model 7.4 Methodology 7.5 Anomalies in the discounted utility model 7.6 Summary 7.7 Review questions 7.8 Applications CHAPTER 8 Alternative Intertemporal Choice Models 8.1 Time preference 8.2 Time-inconsistent preferences 8.3 Hyperbolic discounting 8.4 Modifying the instantaneous utility function 8.5 More radical models 8.6 Empirical evidence 8.7 Policy implications 8.8 Summary 8.9 Review questions 8.10 Applications PART IV Strategic Interaction CHAPTER 9 Behavioral Game Theory 9.1 Nature of behavioral game theory 9.2 Solution concepts 9.3 Mixed strategies 9.4 Bargaining 9.5 Iterated games 9.6 Signaling 9.7 Learning 9.8 Summary 9.9 Review questions 9.10 Review problems 9.11 Applications CHAPTER 10 Social Preferences 10.1 The neoclassical model 10.2 The nature of social preferences 10.3 Factors affecting social preferences 10.4 Modeling social preferences 10.5 Inequality-aversion models 10.6 Reciprocity models 10.7 Empirical evidence 10.8 Policy implications 10.9 Summary 10.10 Review questions 10.11 Applications PART V Conclusion CHAPTER 11 Behavioral Economics: Summary and Outlook 11.1 The agenda of behavioral economics 11.2 Criticisms of behavioral economics 11.3 Methodology 11.4 Are we really irrational? 11.5 Welfare and happiness 11.6 Problems in pursuing happiness 11.7 Policy implications 11.8 Future directions for behavioral economics 11.9 Applications Bibliography Index