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Chicago Booth’s Initiative on Global Markets polled its panels of economic experts on that question, and the answer was a resounding ‘yes.’. North American respondents were unanimous in agreement that “Insights from psychology about individual behavior . . . predict several important types of observed market outcomes that fully rational ...
- Motivation
Research is uncovering motivation insights around these...
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- Motivation
- Example #1: Playing Sports
- Example #2: Taking An Exam
- Example #3: Grabbing Coffee
- Example #4: Playing Slots
- Example #5: Taking Work Supplies
Principle: Hot-Hand Fallacy—the belief that a person who experiences success with a random event has a greater probability of further success in additional attempts. Example: When basketball players are making several shots in a row and feel like they have a “hot hand” and can’t miss. Relation to BE: Human perception and judgment can be clouded by ...
Principle: Self-handicapping—a cognitive strategy where people avoid effort to prevent damage to their self-esteem. Example: In case she does poorly, a student tells her friends that she barely reviewed for an exam, even though she studied a lot. Relation to BE: People put obstacles in their own paths (and make it harder for themselves) in order to...
Principle: Anchoring—the process of planting a thought in a person’s mind that will later influence this person’s actions. Example: Starbucks differentiated itself from Dunkin’ Donuts through their unique store ambiance and product names. This allowed the company to break the anchor of Dunkin’ prices and charge more. Relation to BE: You can always ...
Principle: Gambler’s Conceit—an erroneous belief that someone can stop a risky action while still engaging in it. Example: When a gambler says “I can stop the game when I win” or “I can quit when I want to” at the roulette table or slot machine but doesn’t stop. Relation to BE: Players are incentivized to keep playing while winning to continue thei...
Principle: Rationalized Cheating—when individuals rationalize cheating so they do not think of themselves as cheaters or as bad people. Example: A person is more likely to take pencils or a stapler home from work than the equivalent amount of money in cash. Relation to BE: People rationalize their behavior by framing it as doing something (in this ...
Oct 10, 2023 · Key Points. Prospect theory is a theory in behavioral economics that attempts to describe, mathematically, how people’s decisions are influenced by their attitudes toward risk, uncertainty, loss, and gain. Kahneman and Tversky developed prospect theory to account for people’s decision-making under risk through a series of controlled ...
Oct 10, 2023 · According to rational choice theory, people calculate the costs and benefits of choices in making decisions. The perceived costs, risks, and benefits of certain actions can be dependent on one’s own personal preferences. The underlying notion of rational choice theory dates back to classical economists such as Adam Smith, but the theory was ...
For example, a move from a 50% to a 60% chance of winning a prize has a smaller emotional impact than a move from a 95% chance to a 100% chance (certainty). Conversely, the move from a 0% chance to a 5% possibility of winning a prize is more attractive than a change from 5% to 10%. People over-weight small probabilities, which also explains the ...
Oct 4, 2023 · Defining behavioral economics. Behavioral economics (BE) is the study of economics from a psychological perspective. It aims to understand how individuals actually behave in different economic contexts by challenging the long-standing assumption that people behave rationally. Indeed, most of neoclassical economic theory assumes that individuals ...
Apr 25, 2018 · The literature is by now far too vast to survey satisfactorily, but some examples using individual-level data are Kahneman and Deaton , using the Cantril ladder as the outcome5 and data from the Gallup-Healthways Well-being Index (GHWBI), Luttmer , using life satisfaction as the outcome and data from the National Survey of Families and Households, and Layard et al.
