Introduction to Behavioral Economics

With the rise of behavioral economics courses undergraduates are seeking more formal training and instruction in behavioral economics topics. Introduction to Behavioral Economics covers all the ways consumers and other economic agents behave in an irrational manner, and prepares readers to make rational economic choices.

This book is focused on the broad principles of behavior, which are illustrated using real-world examples, examples from experimental literature, as well as experiential examples. All examples are drawn from news items, historical accounts and the economics literature. Experimental examples are drawn from the economics literature and are in the form of classroom experiments that complement the principles of the book.

Preface xv

1 Rationality, Irrationality, and Rationalization 1

Part 1 Consumer Purchasing Decisions

2 Transaction Utility and Consumer Pricing 17

3 Mental Accounting 41

4 Status Quo Bias and Default Options 70

5 The Winner’s Curse and Auction Behavior 93

Part 2 Information and Uncertainty

6 Bracketing Decisions 125

7 Representativeness and Availability 156

8 Confirmation and Overconfidence 187

9 Decision under Risk and Uncertainty 214

10 Prospect Theory and Decision under Risk or Uncertainty 250

Part 3 Time Discounting and the Long and Short Run

11 Disagreeing with Ourselves: Projection and Hindsight Biases 281

12 Naïve Procrastination 309

13 Committing and Uncommitting 347

Part 4 Social Preferences

14 Selfishness and Altruism 389

15 Fairness and Psychological Games 417

16 Trust and Reciprocity 450

Glossary 473

Index 495

David Just is Associate Professor and Director of Graduate Studies in the Department of Applied Economics and Management at Cornell University where he regularly teaches undergraduate and graduate courses in econometrics, microeconomics, and behavioral economics. Professor Just's areas of expertise are behavioral economics, risk and uncertainty, and information while his research interests center around the use of information, and more particularly, how differences in human capital and information availability affect decisions.
Just received his Ph.D. from the University of California, Berkeley in 2001.? His professional activities include Board Member, Northeast Agricultural and Resource Economics Association; Committee Member, American Agricultural Economics Association; and Honor Societies, Phi Kappa Phi, Golden Key, Alpha Lambda Delta, Phi Eta Sigma, Omicron Delta Epsilon.