Quotes About Behavioral economics

Eight years later, Daniel Bernoulli, Jacob's nephew and an equally distinguished mathematician and scientist, first defined the systematic process by which most people make choices and reach decisions. Even more important, he propounded the idea that the satisfaction resulting from any small increase in wealth "will be inversely proportionate to the quantity of goods previously possessed." With

January is always a good month for behavioral economics: Few things illustrate self-control as vividly as New Year's resolutions. February is even better, though, because it lets us study why so many of those resolutions are broken.

I practice what has come to be called behavioral economics.

Man is an animal that makes bargains: no other animal does this - no dog exchanges bones with another.

If people expect high inflation and raise wages to reflect the high inflation, then it becomes self-fulfilling.

Sunk costs? We pay too much attention to them.

We know through advances in behavioral economics and marketing that one can manipulate perceptions and beliefs.

Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative. These conclusions were well established for choices about gambles and sure things in the domain of money.

people tend to be risk averse in the domain of gains and risk seeking in the domain of losses.

The concept of loss aversion is certainly the most significant contribution of psychology to behavioral economics

asymmetric intensity of the motives to avoid losses and to achieve gains shows up almost everywhere.

Its cost is "sunk" and the Econ would not care whether he had bought the ticket to the game or got it from a friend (if Econs have friends).

Other studies showed that, toward the end of the day, physicians are more likely to prescribe antibiotics and less likely to prescribe flu shots.

The phenomenon we were studying is so common and so important in the everyday world that you should know its name: it is an anchoring effect. It occurs when people consider a particular value for an unknown quantity before estimating that quantity. What happens is one of the most reliable and robust results of experimental psychology: the estimates stay close to the number that people considered—hence the image of an anchor.

In simple words, prospect theory cannot deal with disappointment.

To a psychologist, it is self-evident that people are neither fully rational nor completely selfish, and that their tastes are anything but stable. Our two disciplines seemed to be studying different species, which the behavioral economist Richard Thaler later dubbed Econs and Humans.

Prospect Theory: An Analysis of Decision Under Risk

Losses are weighted about twice as much as gains in several contexts:

Prospect theory turned out to be the most significant work we ever did, and our article is among the most often cited in the social sciences.

During the first five years we spent looking at how people make decisions, we established a dozen facts about choices between risky options. Several of these facts were in flat contradiction to expected utility theory. Some had been observed before, a few were new. Then we constructed a theory that modified expected utility theory just enough to explain our collection of observations. That was prospect theory.

When asked how much they will pay to get overnight delivery of a book they have ordered, the low scorers on the Cognitive Reflection Test are willing to pay twice as much as the high scorers.

The decision of whether or not to protect individuals against their mistakes therefore presents a dilemma for behavioral economists. The economists of the Chicago school do not face that problem, because rational agents do not make mistakes. For adherents of this school, freedom is free of charge.

Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative.

The laziness of System 2 is an important fact of life, and the observation that representativeness can block the application of an obvious logical rule is also of some interest.