the agenda of be good theories – abstractions; 4 criteria behavioral revisions – game theory,...
DESCRIPTION
Are We Really Irrational? Trivializations Even highly motivated experts biased. Misinterpretations e.g. conjunction error, representativeness heuristic, framing. Inappropriate tests Computational limitations, inappropriate problem formats, norms. Rational rationalityTRANSCRIPT
The Agenda of BE Good theories – abstractions; 4 criteria
Behavioral revisions – game theory, loss-aversion, time-inconsistent preferences, inequality-aversion, reciprocity, endowment effects, framing effects, anchoring effects, lack of fungibility, choice bracketing
Criticisms of BE Profusion of models
1. Situation-specific models 2. Heterogeneous Populations 3. Conflicting theories feature of science4. Relatively new area
Lack of normative status
Complicates policy implications
Are We Really Irrational? Trivializations
Even highly motivated experts biased.
Misinterpretationse.g. conjunction error, representativeness heuristic, framing.
Inappropriate testsComputational limitations, inappropriate problem formats, norms.
Rational rationality
Policy Implications Individuals1) Emotions and memory – durability bias, forgetfulness2) Inter-temporal conflicts in decision-making – time-
inconsistency3) Game theory – repeated interactions
Firms1) Inter-temporal conflicts – charging for investment and
leisure goods2) Loss-aversion – reference prices, reducing Q instead of
increasing P3) Game theory – signalling to competitors, labour contracts
and fairness
Governments1) Loss-aversion – policies in recession, trade-offs2) Inter-temporal conflicts – policy trade-offs, pensions,
health issues3) Game theory – auctions, trade policy, environmental
policy, mediation