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Introduction and History

Introduction and History - Introduction and History of...

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Introduction and History of Behavioral Economics
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What is Behavioral Economics Interested in the same topics as standard economics Does not assume full rationality Application of psychological research findings and insights to economics Why? Generating theoretical insights, making better predictions of field phenomenon, and suggesting better policy Does not imply a total rejection of standard economic theory. Standard approach is useful Provide a theoretical framework to study any form of (economic) behavior Makes refutable predictions Many of behavioral economics work modify one or two assumptions to achieve a better psychological realism
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A small demonstration Guess a number between [0,100] The winner is the one who guesses closest to 2/3 of the mean
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Behavioral Economics is a kind of “toolbox” How can we explain consumers’ holding of saving accounts and credit card debt at the same time? Why people buy yearly gym membership instead of pay-per-visit just to visit the gym only 5 times in a year? How can we explain the existence of risk averse people buying lottery tickets? Why can’t you get a cab on a rainy day? Why firms offer you to add additional services/goods when you buy a product? Is it possible to help people save more? Is it possible to help people eat healthy food, lose weight, exercise?
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