Psychology and economics
Subtitle: evidence from the field
By: Stefano DellaVigna.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13420.; Working paper series (National Bureau of Economic Research) -- working paper no. 13420.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 65
Subjects: Economics -- Psychological aspects -- Mathematical models
Description: The research in Psychology and Economics (a.k.a. Behavioral Economics) suggests that individuals deviate from the standard model in three respects: (i) non-standard preferences; (ii) non-standard beliefs; and (iii) non-standard decision-making. In this paper, I survey the empirical evidence from the field on these three classes of deviations. The evidence covers a number of applications, from consumption to finance, from crime to voting, from giving to labor supply. In the class of non-standard preferences, I discuss time preferences (self-control problems), risk preferences (reference dependence), and social preferences. On non-standard beliefs, I present evidence on overconfidence, on the law of small numbers, and on projection bias. Regarding non-standard decision-making, I cover limited attention, menu effects, persuasion and social pressure, and emotions. I also present evidence on how rational actors -- firms, employers, CEOs, investors, and politicians -- respond to the non-standard behavior described in the survey. I then summarize five common empirical methodologies used in Psychology and Economics. Finally, I briefly discuss under what conditions experience and market interactions limit the impact of the non-standard features.
Notes: "September 2007"

Includes bibliographical references (p. 53-65).

Also available in PDF from the NBER world wide web site (www.nber.org).