Behavioural Economics Flashcards

1
Q

Does B.E reject Traditional Approach such as Utility Max. and Equilibrium etc.?

A

NO - B.E recognises that Behaviour Deviates in Systematic + Predictable ways

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2
Q

What are the 3 Criteria to judge Econ. Theories?

A
  1. Congruence w/ Reality
  2. Generality
  3. Tractability
    B.E greatly improves 1. but worsens 3.
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3
Q

Does B.E give more precise Predictions + Equilibria?

A

YES

e.g. can rule out some N.E w/ Realistic Assumptions

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4
Q

What is the Methodology of B.E?

A
  1. Identify Anomalies + clear Violations of an existing model
  2. Use Anomalies –> Create Alternative Theories (Generalise existing models)
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5
Q

What are 3 methods to Identify Anomalies?

A

Lab Experiments
Field Experiments
Process Measures - Combine Lab + Field results w/ Brain Scans + other data – Provide model of decision-making process

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6
Q

What are the Assumptions of Standard Econ. Model?

A
  1. Agents are Rational - Complete + Transitive
  2. Agents are Bayesian Prob. Operators + Updaters
  3. Agents Max. Utility
  4. Consistent Time Preferences
  5. Utility governed by Pure Self-Interest
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7
Q

What do you call an Agent who satisfies all Standard Econ. Model Assumptions?

A

Homoeconomicus

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8
Q

What does B.E say about Standard Model?

A

People are NOT always Rational - Preferences are NOT always Transitive

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