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Advances in Behavioral Economics / Edition 1 available in Paperback
Twenty years ago, behavioral economics did not exist as a field. Most economists were deeply skepticaleven antagonistictoward the idea of importing insights from psychology into their field. Today, behavioral economics has become virtually mainstream. It is well represented in prominent journals and top economics departments, and behavioral economists, including several contributors to this volume, have garnered some of the most prestigious awards in the profession.
This book assembles the most important papers on behavioral economics published since around 1990. Among the 25 articles are many that update and extend earlier foundational contributions, as well as cutting-edge papers that break new theoretical and empirical ground.
Advances in Behavioral Economics will serve as the definitive one-volume resource for those who want to familiarize themselves with the new field or keep up-to-date with the latest developments. It will not only be a core text for students, but will be consulted widely by professional economists, as well as psychologists and social scientists with an interest in how behavioral insights are being applied in economics.
The articles, which follow Colin Camerer and George Loewenstein's introduction, are by the editors, George A. Akerlof, Linda Babcock, Shlomo Benartzi, Vincent P. Crawford, Peter Diamond, Ernst Fehr, Robert H. Frank, Shane Frederick, Simon Gächter, David Genesove, Itzhak Gilboa, Uri Gneezy, Robert M. Hutchens, Daniel Kahneman, Jack L. Knetsch, David Laibson, Christopher Mayer, Terrance Odean, Ted O'Donoghue, Aldo Rustichini, David Schmeidler, Klaus M. Schmidt, Eldar Shafir, Hersh M. Shefrin, Chris Starmer, Richard H. Thaler, Amos Tversky, and Janet L. Yellen.
Table of Contents
LIST OF CONTRIBUTORS xi
PART ONE: INTRODUCTION 1
Behavioral Economics: Past, Present, Future by Colin F. Camerer and George Loewenstein 3
PART TWO: BASIC TOPICS 53
REFERENCE-DEPENDENCE AND LOSS-AVERSION
Experimental Tests of the Endowment Effect and the Coase Theorem by Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler 55
Mental Accounting Matters by Richard H. Thaler 75
PREFERENCES OVER RISKY AND UNCERTAIN OUTCOMES
Developments in Nonexpected-Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk by Chris Starmer 104
Prospect Theory in the Wild: Evidence from the Field by Colin F. Camerer 148
Time Discounting and Time Preference: A Critical Review by Shane Frederick, George Loewenstein, and Ted O'Donoghue 162
Doing It Now or Later by Ted O'Donoghue and Matthew Rabin 223
FAIRNESS AND SOCIAL PREFERENCES
Fairness as a Constraint on Profit Seeking: Entitlements in the Market by Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler 252
A Theory of Fairness, Competition, and Cooperation by Ernst Fehr and Klaus M. Schmidt 271
Incorporating Fairness into Game Theory and Economics by Matthew Rabin 297
Explaining Bargaining Impasse: The Role of Self-Serving Biases by Linda Babcock and George Loewenstein 326
Theory and Experiment in the Analysis of Strategic Interaction by Vincent P. Crawford 344
Behavioral Game Theory: Predicting Human Behavior in Strategic Situations by Colin F. Camerer 374
PART THREE: APPLICATIONS 393
MACROECONOMICS AND SAVINGS
Mental Accounting, Saving, and Self-Control by Hersh M. Shefrin and Richard H. Thaler 395
Golden Eggs and Hyperbolic Discounting by David Laibson 429
The Fair Wage-Effort Hypothesis and Unemployment by George A. Akerlof and Janet L. Yellen 458
Money Illusion by Eldar Shafir, Peter Diamond, and Amos Tversky 483
Fairness and Retaliation: The Economics of Reciprocity by Ernst Fehr and Simon Gächter 510
Labor Supply of New York City Cab Drivers: One Day at a Time by Colin F. Camerer, Linda Babcock, George Loewenstein, and Richard H. Thaler 533
Wages, Seniority, and the Demand for Rising Consumption Profiles by Robert H. Frank and Robert M. Hutchens 548
Incentives, Punishment, and Behavior by Uri Gneezy and Aldo Rustichini 572
Myopic Loss-Aversion and the Equity Premium Puzzle by Shlomo Benartzi and Richard H. Thaler 590
Do Investors Trade Too Much? by Terrance Odean 606
Loss-Aversion and Seller Behavior: Evidence from the Housing Market by David Genesove and Christopher Mayer 633
PART FOUR: NEW FOUNDATIONS 657
Case-Based Decision Theory by Itzhak Gilboa and David Schmeidler 659
Out of Control: Visceral Influences on Behavior by George Loewenstein 689