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Behavioral Economics

Reference Dependent Preferences

Reference dependent preferences are those that depend on comparisons to reference points (often the current state (the status quo), past states, expectations about future states, or social comparisons). There are many examples of reference-dependent behaviors and biases, but one simple example involves just a $100 bill. If someone is told that…
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Biased Beliefs

As mentioned in the introduction to behavioral economics, biased beliefs are beliefs affected by context at the formation of the belief. The example presented in the introduction is simple: a person who is hungry today expects to have a similar hunger level a day or more in the future (which is likely untrue). At that moment, they choose a filling…
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Introduction to Behavioral Economics

Introduction to Behavioral Economics Behavioral economics is a field of economics that attempts to understand why people behave ‘unexpectedly’ in contrast to the traditional economic theory of the rational individual. One common example in behavioral economics is the jam study: people are more likely to purchase (and be satisfied with) a jar of…
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