Search results

The goal of behavioural economics is to improve classic microeconomic theory by introducing motives and concepts from related fields like psychology and sociology. The driving paradigm of most neo-classical economic research is the concept of the Homo Oeconomicus, a human who approaches all problems in a rational and typically selfish way and who possesses boundless computational power and flawless reasoning. Despite the obvious oversimplification, the given assumptions allow the precise analysis of a large number of complex problems and have led to many interesting and often surprising findings and theories. While the value of constructing theoretical economic models is beyond doubt, it is important to be aware that the simplifying assumptions made within limit the scope of the predictions made. The assumption that perfectly reasonable people interact in a strictly logical way often leads to conclusions which bear no resemblance to real-world observations. The role of behavioural economic research is not to abandon theoretical research but to question and test the assumptions made by economic models, to identify contradictions to actual observations when they occur and to develop alternative models to capture apparent flaws in the models, or, as one might argue, flaws in human behaviour. Examples for such flaws include loss aversion1 and non-exponential discounting which, despite being irrational from a theoretical perspective, seem to be prevalent themes in human behaviour. Social preferences play a role when people interact and social norms cause them to behave in a nice way when treated well or to reciprocate and punish their counterpart even at their own expense. Furthermore humans have difficulties when dealing with complex problems, which is referred to as bounded rationality. People tend to make calculation mistakes, use rough approximations and imprecise simplifications when facing difficult problems. The first three chapters of this dissertation cover three different topics tied to behavioural economics. They connect concepts originating from psychology and sociology like intrinsic and extrinsic motivation and the so-called locus of control and apply them to microeconomic problems like the optimal effort provision in a principal-agent setting. The fourth chapter is strongly related to computer science as it describes the development of a computer system intended to simplify the design and conduction of economic experiments. While it is the project most distant to economics, it is arguably also the most ambitious of the four projects.

This thesis contains three chapters studying questions of behavioural and experimental economics. Chapter 1, titled "Heterogeneity in lies and lying preferences", develops a theoretical framework and an experimental design which I use to identify systematic patterns of lying behaviour in the presence of heterogeneity of lies and decision-makers. I show that accounting for these patterns provides large gains in out-of-sample predictions of lying decisions. Chapter 2, titled "Eliciting preferences for truth-telling in a sample of politicians", studies the connection between politicians' truth-telling preferences and observable variables such as re-election success. The chapter has been published in the Proceedings of the National Academy of Sciences. Chapter 3, titled "Reasoning about others' reasoning", introduces an experimental design strategy to disentangle cognitive from beliefbased levels of play in a model of iterative reasoning based on observed choices in an experiment. The chapter has been published in the Journal of Economic Theory. ; Aquesta tesi conté tres capítols que estudien qüestions d'economia del comportament i experimental. El capítol 1, titulat "Heterogeneïtat en mentides i preferències per mentir", desenvolupa un marc teòric i un disseny experimental que faig servir per identificar patrons sistemàtics de comportament mentider en presència d'heterogeneïtat de mentides i de decisors. Demostro que tenir en compte aquests patrons proporciona grans guanys en prediccions fora de la mostra. El capítol 2, titulat "Obtenir preferències per dir la veritat en una mostra de polítics", estudia la connexió entre les preferències per dir la veritat dels polítics i variables observables com l'èxit de la reelecció. El capítol s'ha publicat a Proceedings of the National Academy of Sciences. El capítol 3, titulat "Raonar sobre el raonament dels altres", introdueix una estratègia de disseny experimental per diferenciar en un joc els nivells d'actuació basats en creences dels basats en límits cognitius en un ...

Traditional economic theory assumes that individuals are self-interested. They only care about their own well-being and disregard the impact of their actions on the others. However, the assumption of selfish individuals is unable to explain a number of important phenomena and puzzles. Individuals frequently engage in actions that are costly to themselves with no apparent reward. Behavioural economics provides plausible explanations for these actions. Individuals can be "boundedly rational" (Simon, 1955, and Kahneman et al. 1982) and/or can be driven by altruistic, equity and reciprocity considerations (see for an overview Fehr and Schmidt, 2006). Over the past decade, researchers have applied behavioural economics models to the study of organisations and how contracts should be designed in the presence of non-standard preferences and asymmetric information or incomplete contracts (see for an overview of the literature Köszegi, 2014). In my current research, I try to be at the forefront of these new behavioural economics applications into traditional industrial organisation and contract theory themes. The usual prescriptions of standard models can be misleading if potential differences in the agents' preferences are overlooked. Behavioural economics can make great progress if it takes into proper accountmarket and organisational features. ; Doctorat en Sciences économiques et de gestion ; info:eu-repo/semantics/nonPublished

Chapter 2 presents an abstract, game-theoretic framework that describes how behaviour could be influenced by context effects. The empirical analysis from Chapter 3 uses the SOEP to evaluate the extent to which health-conscious behaviour affects the demand for private supplementary health insurance in a cross-sectional analysis. Chapter 4 is an epistemological discussion of welfare. It is argued that decisions such as on nudging cannot be justified under welfaristic premises, so that responsibility for such decisions cannot be transferred to objective circumstances.

Behavioural economics and behavioural finance are rapidly expanding fields that are continually growing in prominence. While orthodox economic models are built upon restrictive and simplifying assumptions about rational choice and efficient markets, behavioural economics offers a robust alternative using insights and evidence that rest more easily with our understanding of how real people think, choose and decide. This insightful textbook introduces the key concepts from this rich, interdisciplinary approach to real-world decision-making. This new edition of Behavioural Economics and Finance is a thorough extension of the first edition, including updates to the key chapters on prospect theory; heuristics and bias; time and planning; sociality and identity; bad habits; personality, moods and emotions; behavioural macroeconomics; and well-being and happiness. It also includes a number of new chapters dedicated to the themes of incentives and motivations, behavioural public policy and emotional trading. Using pedagogical features such as chapter summaries and revision questions to enhance reader engagement, this text successfully blends economic theories with cutting-edge multidisciplinary insights. This second edition will be indispensable to anyone interested in how behavioural economics and finance can inform our understanding of consumers' and businesses' decisions and choices. It will appeal especially to undergraduate and graduate students but also to academic researchers, public policy-makers and anyone interested in deepening their understanding of how economics, psychology and sociology interact in driving our everyday decision-making.

Introducing behavioural economics -- Microeconomic principles -- Motivations and incentives -- Heuristics and bias -- Prospects and regrets -- Learning -- Time and plans -- Bad habits -- Sociality and identity -- Personality, moods and emotions -- Behavioural public policy -- Neuroeconomics I: Principles -- Neuroeconomics II: Evidence -- Behavioural finance -- Behavioural anomalies in finance -- Corporate investment and finance -- Emotional trading -- Macroeconomics and financial systems -- Behavioural macroeconomics and finance -- Financial instability and macroeconomic performance -- Happiness and wellbeing -- Bibliography -- Index.

I have been writing on the different schools of economic thought through the ages. One interesting take-away from the last half-century is how much economists' attention has been drawn away from mechanical, macroeconomic explanations and towards how people actually make their economic decisions. There is, for example, a revival of the Austrian School, which stresses the subjective nature of values and economic choices; the Public Choice School, which looks at how collective decisions are made, and the consequences of that for economics; and Behavioural Economics, which attempts to bring human psychology into the study of personal choices.At the heart of the Public Choice School approach is the idea that every stage of the democratic decision process — from elections, through the legislature, to the bureaucracy that implements the laws and the judiciary that interprets them — is riddled with self-interest, leading to decisions that are irrational and often factional. And for its part, Behavioural Economics hinges around the idea that natural biases in the way human beings see and respond to events also creates some shocking irrationalities.Behavioural Economics has applied this psychological approach largely to the ways that individuals make choices. But I wondered what might be revealed if we took it into the making of collective decisions. Is there more than mere self-interest at work? Is the democratic process not riddled with other psychological biases too.To start with, one of the strongest natural biases identified by Behavioural Economic is risk aversion. It is why bad news sells newspapers; we are much more alert to and concerned about bad things than good ones, partly because bad things can be fatal to us. But this shows up in the public choice environment too. I saw an example of this in the Thatcher era, when a UK-wide private hospital company decided to bid to build and run a new NHS hospital. Department of Health bureaucrats were so keen to cover their own backs that the tender documents with all their provisos formed a metre-high stack, requiring the company's response to be even higher. And how did the bureaucrats respond to this bid to run NHS provision in a completely new way? After two months of silence, the first question they asked was what kind of cutlery would be used in the staff canteen. Can't be too careful, they say. But yes, that was too careful, and indeed the political system abounds in being too careful. We pass laws and regulations that attempt to keep people completely safe from harm. It is irrational, because the extra cost of guaranteeing that extra featherbedding is huge; and overprescriptive regulations thwart people from trying new ways of doing things that might just prove more productive, and even safer.As we make our way through the other cognitive biases identified by Behavioural Economics, we see the democratic — i.e. political — system falling for every one of them. Bounded rationality, for example: rather than consider very possible implication of every possible option, we tend to follow 'rules of thumb'. And if those work reasonably well, we tend to stick with them (what these economists call 'satisficing') even though other rules of thumb might actually work better. In Public Choice terms, Bryan Caplan showed the bounded rationality of electors: they tend to favour government solutions, for instance, over market solutions. As do politicians, of course. And for their part, bureaucrats, especially regulators, tend to assume the superiority of regulation over competition.How decisions are presented. the choice architecture, also affects personal choices. That is the whole theory behind 'nudge' — tell people the downsides of smoking, for instance, and they will probably do less of it. But it works in political decision-making too. Should we have more free trade, which could deliver better choice and lower costs? Well, international competition might also create job losses too, and you can be sure that the media focus will be on the unemployment (risk aversion). No wonder that electors and politicians opt for protectionist policies.Confirmation bias is another human quirk, where we see and judge things in terms of our own beliefs, rather than against any objective standard. Politicians are particularly prone to this error. Rent controls, for example, make it less worthwhile for property owners to rent out rooms and homes; so they evict their tenants and quit the market. That leads to calls for more tenant security. And if owners can't evict people anyone but can't make any money out of them because of the rent controls, they just let their properties fall into disrepair. Which is taken to be proof of how greedy 'landlords' are and leads to yet further controls… and so on, until the whole rented sector dries up. Rationally, we should scrap the controls and let the market allocate things. But rationalism is little use in politics.Politics abounds with another bias, the sunk costs fallacy. The high speed rail link (HS2) between London and Birmingham is costing hundreds of billions of pounds for very little difference in journey time, but so much construction has been done that politicians are embarrassed to pull the plug on the project. The same happened with Edinburgh's (three times over budget and five years late) new tram system and Scotland's (also three times over budget and five years late) replacement ferries.Politicians also make decisions on the basis of salience. What is playing in the media today — prison escapes, dangerous dogs, school truancy — is likely to shape policy far more (and more urgently) than longer term issues — like disincentives in the tax and welfare systems — that might be far more significant in their effects.The Behavioural Economics bias list goes on. Optimism bias — plenty of evidence for that in public procurement, and projects like the postwar replacement of 'slums' with 'modern' blocks that people hated even more. Or mental accounting — sticking with 1001 budgets for separate projects, rather than re-thinking spending as a whole (as Canada did in the 1990s). Or the endowment effect of over-valuing what we already have (like 'our' 'precious' NHS). I have decided to explore all this psychology of public choice in more detail. If we know exactly what foibles are producing such daft public policy, after all, we might be able to do something about it.