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 2

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 2  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 3  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 4  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 5  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    The endowment effect

Case 5.2    Insensitivity to bad income news

Case 5.3    Loss-aversion in golf

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

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 7  The Discounted Utility Model

7.1      Introduction

7.2      Origins of the DUM

7.3      Features of the DUM

7.4      Methodology

7.5      Anomalies in the DUM

7.6      Summary

7.7      Review questions

7.8      Applications

Case 7.1    Empirical estimates of discount rates

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

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 9  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 and self-serving bias

Case 9.3    Market entry in monopoly

CHAPTER 10  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 Wason 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 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

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