Talk:Bestiary of Behavioral Economics

topics so far
As of my last conversation, I think our areas of interest include: There were other areas we talked about, feel free to add stuff below. But I believe these are the starting areas of interest, and I'll be planning on finding some references in these areas to help you along. TDang (discuss • contribs) 22:18, 19 September 2011 (UTC)
 * Commitment mechanisms
 * These can relate to many things, but essentially the idea is that someone may understand they could be irrational in the future, and take steps in the present to make it easier to act rationally or harder to act irrationally later.
 * Mental accounting
 * Again, this can take a number of shapes. It's primarily about using heuristics to help make decisions. It can relate to commitment mechanisms since sometimes the accounting is forward-looking.
 * Behavioral finance
 * This is a very broad topic area. It certainly relates to any of the areas where probabilities and risk come into play. The "endowment effect" is probably also important.
 * Efficiency wages / fair wages
 * This is about how the wages actually paid might not come straight from the equilibrium determined by supply and demand intersecting. If workers feel that they are being paid "well" (which might mean above the equilibrium wage) they might work harder, and if the feel they are being paid "poorly" they might either not take the job at all, or take it and work inefficiently, perhaps even conducting sabotage.
 * Overconfidence
 * People are not very good at judging how good they are at things, and usually this takes the form of overestimating their own abilities. Sometimes it can be particularly tricky because the people who are bad at something can also be more prone to believe they're good at it.

Zero Price Outline
Currently the Zero Price page is incomplete. Rather than containing a full-blown article on the zero price effect, it contains a detailed outline for an article, complete with suggested discussion topics, short descriptions for each section, and a list of helpful citations. I would love to see an article developed, either by myself at a later date or by anyone with an interest in behavioral economics. The outline should provide anyone interested with enough information to complete the article.

some starting references
(This message is aimed at the students in my economics course, anyone else is welcome to consider them however they like.)

Here's some general thoughts on the sources here.
 * 1) I'm not requiring you to use the sources I'm posting. They are recommended places I would to start if you otherwise don't know where to start, or to continue if you've already started and are not sure where to go next.
 * 2) Some of the sources I'm posting will be "heavy". There will be a lot in them, and some of that will be hard to understand. Your first time through, read it, skipping the parts you don't understand, and see if you can get the gist of it. Your second time through read more carefully, and think about the hard spots. If there's math or theory which you believe is beyond your current abilities, you can decide (and talk to me if you like) about whether that's a good point to expand your abilities or whether you can afford to skip those bits.
 * 3) Some of the sources will also be "broad". You should not expect yourself to capture the entire area in your one article, but to pick out enough good points that it can start to make sense to someone who's new to the ideas.
 * 4) A lot of these references require you to be on-campus to access them. You can make yourself virtually on campus while physically elsewhere by using VPN. I'll include information on that in an email.
 * 5) I use Google Scholar a lot. One of the ways to use it is by tracking references. For instance, if I searched for behavioral economics mental accounting, I could then go to the top thing "Mental Accounting Matters", and click on "Cited by 1057" or "Related articles" to find other good stuff.

Some particular references: TDang (discuss • contribs) 21:50, 29 September 2011 (UTC)
 * Mental accounting:
 * http://www.friedom.com/JDM%20Docs/Thaler%20Mental%20Accounting%201999.pdf
 * Committment:
 * http://papers.ssrn.com/sol3/papers.cfm?abstract_id=888752
 * Efficiency wages:
 * http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0262.2006.00707.x/abstract
 * http://www.jstor.org/stable/2937787
 * Overconfidence:
 * http://www.sciencedirect.com/science/article/pii/S0167487007001109
 * http://www.sciencedirect.com/science/article/pii/S0167487006001024
 * Behavioral finance:
 * http://www.jstor.org/stable/4480205

Here's another reference which is interesting, and another example of zero perhaps being a special price. I was reminded of studies like the following which suggest that under some circumstances it's better to SELL a product than to GIVE it away free, even if it's not an effort to make money, but just an effort to get people to use a product (such as in economic development aid): http://harrisschool.uchicago.edu/programs/beyond/workshops/ppepapers/commit103006.pdf TDang (discuss • contribs) 21:18, 3 October 2011 (UTC)
 * On the other hand, this article does a quick-and-dirty survey of results from economic development experiments, and argues that in most cases, free is better than charging (at least in terms of the demand side). TDang (discuss • contribs) 21:28, 3 October 2011 (UTC)

Another efficiency wage reference
I haven't looked beyond the abstract yet, but... This looks at efficiency wages and backward-bending labor supply. TDang (discuss • contribs)

Another good source for efficiency wages is the sorta-popular book Animal Spirits by Akerlof and Schiller. It discusses two stories behind the efficiency wage. There's particularly good stuff starting on page 104, which can be seen here. TDang (discuss • contribs) 21:48, 21 October 2011 (UTC)

Putting math in
It can be possible to edit math with just standard tools. This version of the efficiency wages page does that fine. However, there are other ways to edit math which can be very useful. See the Help:Formulas page for some tips on that, and I can help if needed. TDang (discuss • contribs) 22:13, 21 October 2011 (UTC)

Material already in the book
There are already pages on the following. Most likely additional, related pages could be added if you're interested:
 * Self-Interest
 * This is a very interesting area where the boundary between traditional and behavioral economics is fuzzy. In practice, most of our standard economics assumes that people are selfish--that they are only concerned about their own consumption, and don't get any utility (or harm) from others' consumption. But standard economic theory doesn't actually require that consumers are selfish, it's just the most common assumption.
 * Commitment
 * When people make decisions for the future, standard economics assumes that they will follow through on those plans in the future. Standard rationality would say that if I know I'll want to consume a lot when I'm old, then I'll save money now. In practice, it seems like people often have a hard time managing their own behavior and following through on their plans, or resisting temptation in the present.
 * Commitment devices are ways a consumer can rationally handle the belief that they'll be irrational in the future.
 * Efficiency wages
 * This refers to the idea that employees might get paid a bit more than the most common economic arguments predict. There is a behavioral and non-behavioral explanation for this.
 * This is about how the wages actually paid might not come straight from the equilibrium determined by supply and demand intersecting. If workers feel that they are being paid "well" (which might mean above the equilibrium wage) they might work harder, and if the feel they are being paid "poorly" they might either not take the job at all, or take it and work inefficiently, perhaps even conducting sabotage.
 * Zero price
 * In some sense, zero should be just another price level. IN practice, people seem to respond very differently to a "price" of FREE than other prices.

Other and related topics
There were other areas we talked about, feel free to add stuff below. But I believe these are the starting areas of interest, and I'll be planning on finding some references in these areas to help you along.
 * Related to Self-Interest and Efficiency wages is the notion of reciprocity, that people may respond in ways that aren't rational (by standard economics notions of rationality) to another person's behavior, whether responding positively to positive behavior or negatively to negative behavior. (See this and this at Wikipedia.)
 * Mental accounting
 * Again, this can take a number of shapes. It's primarily about using heuristics to help make decisions. It can relate to commitment mechanisms since sometimes the accounting is forward-looking.
 * This topic has been claimed TDang (discuss • contribs) 17:01, 30 March 2012 (UTC)
 * Endowment effect
 * It often appears that when a person feels ownership of something, they place a higher value on it than they would if they were just offered it.
 * This topic has been claimed TDang (discuss • contribs) 19:24, 12 March 2012 (UTC)
 * Overconfidence effect
 * People are not very good at judging how good they are at things, and usually this takes the form of overestimating their own abilities. Sometimes it can be particularly tricky because the people who are bad at something can also be more prone to believe they're good at it.
 * Inequity aversion
 * Standard economics assumes that people have preferences that they try to satisfy. Behavioral economics find places where people's utility depends on the relative amount of stuff various people have--maybe consumers feel worse about their consumption if they know it is much less or more than another consumer's.
 * Dictator game, Ultimatum game, Trust_game are three games (and there are other varieties) which are often used to study how people might make decisions when concerned with inequity, fairness, other's well-being, reciprocity, or any of the other notions for why a person might not behave completely selfishly.
 * This topic has been claimed TDang (discuss • contribs) 19:45, 27 March 2012 (UTC)
 * Satisficing
 * This is one of the oldest ideas in behavioral economics, that rather than maximizing utility, consumers try to do well-enough in some sense.
 * Bounded rationality
 * Bounded rationality encompasses a lot of ideas, including satisficing, that consumers may sorta try to maximize utility but are limited in how perfectly they can do so.
 * Anchoring
 * Framing_effect_(psychology)
 * How a decision is presented might significantly change how a person responds to it, even though it's really the same decision.
 * This topic has been claimed TDang (discuss • contribs) 19:24, 12 March 2012 (UTC)
 * Choice with uncertainty
 * I'm not providing a link here because I don't think there's a good link.
 * There is a very standard way to deal with how people make choices when there is some risk (you can see it in Chapter 12 of the Varian textbook). There are also many demonstrations that the standard approach is very flawed. So there are a number of alternatives.
 * This is a significant area in behavioral economics and behavioral finance, but it's also a bit specialized. If you want to persue this area, let me know and I'll provide more direction.

Additional topic possibilities

 * Independence of irrelevant alternatives (IIA)
 * Consumers are supposed to follow the IIA. An example is something like this: You go into a restaurant and the server sells you that there is a special on pasta and on chicken. You decide to get the chicken. The server then adds that there's also a fish special. This motivates you to change your mind and order the pasta. By our normal "rational" economics this doesn't make sense-it's pretty much a violation of the revealed preference idea. But things like that happen often and are used as tools in marketing.
 * This topic has been claimed TDang (discuss • contribs) 16:23, 12 March 2012 (UTC)
 * Money illusion
 * Usually, in economics, we assume that people are only concerned about money because of what it can purchase. So, if there's inflation which raises someone's wages by 20% and also raises prices by 20%, that person should act as if nothing has changed. But people often do respond to the nominal prices of things as well as the real prices. This is a an individual, microeconomic phenomenon with macroeconomic implications.
 * Activity bias
 * This is the idea that people want to take action-just sitting there dong nothing doesn't feel right, and so if the optimal decision is to sit there doing nothing, they might make a less-than-optimal decision. This is most clearly a problem for economic researchers, because in experimental economics an experiment might be designed in such a way to accidentally encourage stupid behavior. But it may also explain real-world phenomena like over-active trading of stocks.
 * This topic has been claimed TDang (discuss • contribs) 23:55, 9 March 2012 (UTC)
 * This is also sometimes called the "active participation hypothesis".
 * A good article to start with in looking at this might be: "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality" by Vivian Lei, Charles N. Noussair and Charles R. Plott. TDang (discuss • contribs) 00:00, 10 March 2012 (UTC)