The Agenda of BE

1. 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

2. Criticisms of BE • Profusion of models • Situation-specific models • Heterogeneous Populations • Conflicting theories feature of science • Relatively new area • Lack of normative status • Complicates policy implications

3. Are We Really Irrational? • TrivializationsEven highly motivated experts biased. • Misinterpretationse.g. conjunction error, representativeness heuristic, framing. • Inappropriate testsComputational limitations, inappropriate problem formats, norms. • Rational rationality

4. Policy Implications • Individuals • Emotions and memory – durability bias, forgetfulness • Inter-temporal conflicts in decision-making – time-inconsistency • Game theory – repeated interactions • Firms • Inter-temporal conflicts – charging for investment and leisure goods • Loss-aversion – reference prices, reducing Q instead of increasing P • Game theory – signalling to competitors, labour contracts and fairness • Governments • Loss-aversion – policies in recession, trade-offs • Inter-temporal conflicts – policy trade-offs, pensions, health issues • Game theory – auctions, trade policy, environmental policy, mediation