An Introduction to Behavioral Economics

Second edition

by Nick Wilkinson and Matthias Klaes

Table of contents

PART I Introduction

CHAPTER ONE - 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
  • Case 1.1 Loss-aversion in monkeys
  • Case 1.2 Money illusion
  • Case 1.3 Altruism – the joy of giving
CHAPTER TWO - Methodology
  • 2.1 Theories
  • 2.2 Evidence
  • 2.3 Consilience
  • 2.4 Summary
  • 2.5 Review questions
  • 2.6 Applications
  • Case 2.1 Do economists need brains?
  • Case 2.2 Riots in the UK

PART II FOUNDATIONS

CHAPTER THREE - Values, Preferences and Choices
  • 3.1 The standard model
  • 3.2 Axioms, assumptions and definitions
  • 3.3 The evolutionary biology of utility
  • 3.4 Broadening rationality
  • 3.5 Types of utility
  • 3.6 The neuroscientific basis of utility
  • 3.7 Policy implications
  • 3.8 Summary
  • 3.9 Review questions
  • 3.10 Applications
  • Case 3.1 Drug addiction
  • Case 3.2 When abstention is better than moderate consumption
  • Case 3.3 Environmental protection
  • Case 3.4 The way the brain buys
CHAPTER FOUR - Beliefs, Heuristics and Biases
  • 4.1 The standard model
  • 4.2 Probability estimation
  • 4.3 Self-evaluation bias
  • 4.4 Projection bias
  • 4.5 Magical beliefs
  • 4.6 Causes of irrationality
  • 4.7 Summary
  • 4.8 Review questions
  • 4.9 Review problems
  • 4.10 Applications
  • Case 4.1 Fakes and honesty
  • Case 4.2 Trading on testosterone
  • Case 4.3 Celebrity contagion and imitative magic
CHAPTER FIVE - Decision-making under Risk and Uncertainty
  • 5.1 Background
  • 5.2 Conventional approaches to modifying EUT
  • 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
  • Case 5.1 Endowment effects
  • Case 5.2 Insensitivity to bad income news
  • Case 5.3 Loss-aversion in golf
CHAPTER SIX - 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
  • Case 6.1 The equity premium puzzle
  • Case 6.2 Why you can’t find a cab on a rainy day
  • Case 6.3 Consumer spending and housing wealth

PART III INTERTEMPORAL CHOICE

CHAPTER SEVEN - 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
  • Case 7.1 Empirical estimates of discount rates
CHAPTER EIGHT - 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
  • Case 8.1 Price plans for gym memberships
  • Case 8.2 The savings problem
  • Case 8.3 The desire for rising consumption profiles

PART IV STRATEGIC INTERACTION

CHAPTER NINE - Behavioral Game Theory
  • 9.1 Nature of behavioral game theory
  • 9.2 Equilibrium
  • 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
  • Case 9.1 Penalty kicking in professional soccer
  • Case 9.2 Impasses in bargaining
  • Case 9.3 Market entry in monopoly
CHAPTER TEN - Social Preferences
  • 10.1 The standard 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
  • Case 10.1 The Watson Test
  • Case 10.2 Public goods and free riding
  • Case 10.3 Sales force compensation
  • Case 10.4 Too much virtue is a vice

PART V CONCLUSION

CHAPTER ELEVEN - 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
  • Case 11.1 The effects of brain damage on decision-making
  • Case 11.2 Pursuing happiness
  • Case 11.3 The bioeconomic causes of war
  • Case 11.4 How to get children to eat vegetables
  • Bibliography
  • Index