Behavioral Economics Detailed Final Exam Review with Q&A 2024.

Behavioral Economics Detailed Final Exam Review with Q&A 2024. Definition behavioural economics - attempt to increase the explanatory and predictive power of economic theory by providing it with more psychologically plausible foundations - can be traced to coginitve psychology - direct opposite to behaviourism - influenced by psychology, with additional imputs form sociology, anthropology etc. Connected fields Economics, Politics, Ethics, Marketing, Social psychology, Consumer psychology, Cognitive psychology Classical economics compared to behavioural economics - Assumption that humans act rational - do not assume that people behave completaly rational but that deviations are small and ignorable - models are siple and complexities and deviations are ignored - models are normative - Focus on market, economies, competition Behavioural economics compared to classical economics - humans act with bounded rationality - deviations are substantial and systematic and predictable. therfore we can develop descriptive theories of human behaviour - models are more realistic and complex - models are descriptive - Focus on Institutions, and the context decisions are made in