Posts Tagged ‘behavioral economics’

Behavioral Economics: Hyperbolic Discounting

This week we’ll be discussing hyperbolic discounting. This is the human tendency to prefer smaller payoffs now over larger payoffs later. This is essentially caused because humans’ perception of time is not linear; people tend to think of time in relative terms. An example of hyperbolic discounting would be to ask someone if they would […]

Read the rest of this entry »

Behavioral Economics: Social Preferences

This week’s topic deals with interesting findings in behavior dealing with trust, fairness, and reciprocity. I’ll be discussing three different economic experiments (all run independently from one another with different participants). In each of these experiments, two people are brought into a lab, and one is designated as the proposer and the other as the […]

Read the rest of this entry »

Behavioral Economics: Incentives

This week’s topic of incentives gave me trouble trying to figure out what to write, as incentives is such a broad topic that can be discussed in so many different ways. Incentives are the motivation of why a person acts a particular way. I eventually decided that I would focus in on the strange mystery […]

Read the rest of this entry »

Behavioral Economics: Money Illusion

A short topic this week, but an important one nonetheless. Money Illusion refers to the tendency of people to think of currency in nominal terms (its face value), rather than real terms (its purchasing power). Consider the following question presented to people: Suppose Adam, Ben, and Carl each received an inheritance of $200,000, and each […]

Read the rest of this entry »

Behavioral Economics: Prospect Theory

One of the most well-known economic theory papers is Prospect Theory, written by Kahneman and Tversky. Prospect Theory discusses how people violate Expected Utility Theory by valuing gains and losses differently from one another Before we get into Prospect Theory (PT), here’s a little background on Expected Utility Theory (EUT). EUT discusses how a decision […]

Read the rest of this entry »