00_P & B - Chapter 01
Introduction Lecture
Introduction Lecture
Set of flashcards Details
| Flashcards | 16 |
|---|---|
| Language | English |
| Category | Psychology |
| Level | University |
| Created / Updated | 21.01.2022 / 03.02.2022 |
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What is behavioral economics? (including distinction (Abgrenzung) to behaviorism and neoclassical economists)
- Behavioral economics combines elements of economics and psychology
- try to understand how and why people behave the way they do in the economic environmental
- Behavioral economics considers people as human beings who are subject to emotion and impulsivity, and who are influenced by their environments and circumstances.
This characterization draws a contrast to traditional economic models that have treated people as purely rational actors—who have perfect self-control and never lose sight of their long-term goals—or as people who occasionally make random errors that cancel out in the long run.
People do not always make what neoclassical economists consider the “rational” or “optimal” decision, even if they have the information and the tools available to do so. It differs from neoclassical economics, which assumes that most people have well-defined preferences and make well-informed, self-interested decisions based on those preferences.
Der Behaviorismus (engl. Behaviorism; von engl. behavior = verhalten) erforscht und erklärt das Verhalten von Menschen und Tieren nur mit naturwissenschaftlichen Methoden. Dabei beschränkt sich ein Behaviorist auf das von außen objektiv beobachtbare Verhalten als Reaktion auf Reize.
Behavioral Economics
- disciplines and fields of application
they influece each other
Behavioral Economics
- Differences between "Classical Economics" and "Behavioral Economics"
Classical economics:
Humans act rational = homo oeconomicus
-> Economists do not assume complete rationality of human behavior. However, their models are based on the assumption that deviations are unsystematic, small and hence
negligible/minor.
Behavioral economics:
Humans act with limited rationality = «bounded rationality»
-> Deviations from rational behavior are substantial/major and systematic enough, hence they are predictable to develop new descriptive theories of human behaviors
Behavioral Economics
- Differences between "Classical Economics" and "Behavioral Economics" regading their models
Classical economics:
Normaitve
- Simplified models, complexities and deviations are ignored
- normative models (Nutzen x Auftretenswahrscheinlichkeit -> Option mit höchstem Wert hat den grössten Nutzen gemäss Modell)
- im Fokus steht der subjektive Nutzen (Entscheidungsalternativen -> welche hat den grössten Nutzen
Behavioral economics:
Descriptive
- wie entscheiden Menschen wirklich und was gibt es für Einflussfaktoren?
- basier auf Prospect Theory (positive Ereignisse -> weniger Risiko / negative -> höheres Risiko)
- Erwartungsnutzen wird nicht als Grundlage genutzt
Behavioral Economics
- Differences between "Classical Economics" and "Behavioral Economics" regading their focuses
Classical Economics:
Focus on markets, economies, competition vs. monopoly etc.
Behavioral Economics:
Focus on institutions and on the context in which decisions are made
Assumptions in economics: Attributes of the homo oeconomicus
- What are the attributes of the homo economicus and how is the HE used in "Classical Economics" context
- Fixed preferences
- Completely rational behavior
- Complete market transparency and foresight
- Immediate reaction to new information
- Utility maximization
- Unlimited self-control
- Classical economics accepts that the homo oeconomicus is not realistic depiction of human behavior
- Homo oeconomicus is used as a simplifying assumption in economic models
Deviations to Homo Economicus
- Altruism - How show the "Altruism" a deviation to Homo Economicus? What are exaples for "Altruism"?
-> Uneingennützigkeit
The "Altruism" shows that humans do not act completely rational
Selfless behavior (e.g., donating, sponsoring and volunteering) or Stem cell donation
Deviations to Homo Economicus
- Decoy Effect - How show the "Decoy Effect" a deviation to Homo Economicus? What are exaples for "Decoy Effect"?
The "Decoy Effect" shows that humans do not have fixed preferences
Designing a product portfolio with certain product attributes and pricing (e.g. iphones)
Deviations to Homo Economicus
- Primacy and Recency Effect - How show the "Primacy and Recency Effect" a deviation to Homo Economicus? What are exaples for "Primacy and Recency Effect"?
The "Primacy and Recency Effect" shows that humans do not react mmediately to new information
Example:
Recruitment decisions
Primacy effect (Information at the beginning):
Impressions based on the CV vs information gathered during the subsequent interview
Recency effect (Information at the end)
Judgement is unduly influenced by information obtained towards the end of the interview
Both can perceive longer that other information
Deviations to Homo Economicus
- Anchoring (anchor heuristics) - How show the "Anchoring (anchor heuristics)" a deviation to Homo Economicus? What are exaples for "Anchoring (anchor heuristics)"?
The "Anchoring (anchor heuristics)" shows that humans do not react mmediately to new information
Example: Decision-making in organizations
- projects are planned often very optimistic and initial estimates and predictions are actually readjusted once new information becomes available or the market changes
- Anchor = initial estimations
- instead of adjust the estimations if there is new information available, project managers often miss this task due to the anchor and do insufficient adjustments
Reminder Anchor:
beschreibt den Effekt, dass Menschen bei Entscheidungen von Umgebungsinformationen beeinflusst werden, ohne dass ihnen dieser Einfluss bewusst wird. Die Umgebungsinformationen werden als der „Anker“ bezeichnet, an dem sich die Entscheidung orientiert. Umgebungsinformationen können selbst dann einen Einfluss haben, wenn sie für die Entscheidung eigentlich irrelevant sind. Die Folge ist eine systematische Verzerrung in Richtung des Ankers.
Deviations to Homo Economicus
- Influence of image, trust and subjective impressions - How show the "Influence of image, trust and subjective impressions of a brand" a deviation to Homo Economicus? What are examples?
The " Influence of image, trust and subjective impressions " shows that humans do not always maximizing the utility
Example 1: Use of testimonials in advertising, e.g. iPhone vs. Android, Mac vs. PC
Example 2: Use of testimonials in advertising Roger Federer
Deviations to Homo Economicus
- Large number of options: elimination-by-aspect, followed by satisficing - How show "Large number of options: elimination-by-aspect, followed by satisficing" a deviation to Homo Economicus? What are examples?
The "Large number of options: elimination-by-aspect, followed by satisficing heuristic" shows that humans do not always provide complete market transparency and foresight (Vorausschau)
We are usually make choice based on a limited number of alternatives = «consideration set» -> e.g. we are open the Zalando App and looking on that platform for socks
Deviations to Homo Economicus
- Limited self-control leads to procrastination - How show "Limited self-control ->
procrastination" a deviation to Homo Economicus? What are examples?
The "Limited self-control -> procrastination" shows that humans do not always have unlimited power
Hyperbolic discounting -> it is very difficult to postpone the temptation (missing self-control)
-> Hence humans do not have unlimited will power
Models of classical economics vs. behavioral economics
- Name the "Principles of the models in behavioral economics" / differences of the Expected utility theory (CE) and Prospect theory (BE)
Principles of the models in classical economics:
Expected utility theory: When choosing between options, humans maximize
their gain based on the calculated expected utility
EUi = Σ pij * uij (probability x amount of utiles) -> Wahrscheinlichkeit x Höhe des Nutzens
Principles of the models in behavioral economics:
Prospect theory: Humans strive to avoid losses, judge probabilities differently from their
actual values and based on (sometimes arbitrary) reference points
e.g. loss aversion, risk aversion, mental accounting
Models of classical economics vs. behavioral economics
- Name the "Principles of the models in behavioral economics" / differences of the Discounted utility theory (CE) and Hyperbolic discounting (BE)
Principles of the models in classical economics:
Maximizing utility:
Humans strive to maximize their own utility
Principles of the models in behavioral economics:
Social utility / Other-Regarding Preferences:
Humans consider other people’s wellbeing and value fairness
What are methods applied in behavioral economics research?
- Field experiment
- Laboratory experiment
- Natural experiment
- Secondary data
