Part 1: Introduction Chapter 1. Introduction & Key Concepts of Microeconomics 1. What is Behavioral Economics? 2. Key Concepts: Marginal Reasoning Opportunity Cost The Marginal Principle The Equimarginal Principle 3. Key Concepts: Equilibrium and Efficiency Nash Equilibrium Comparative Statics Pareto Efficiency Chapter 2. Insights from Behavioral Science 1. Social Preferences and Social Norms Adam Smith and the Impartial Spectator Rule Following Task: Avatar Pedestrian Sharing the Rewards of Collaboration The 50-50 Norm Incurring a Cost to Enforce a Social Norm 2. Mental Shortcuts Mental Accounting Default Options 3. Cognitive Bias The Decoy Effect Present Bias 4. Problems with Probabilities Rare Events The Gambler's Fallacy 5. Instinctive Urges and Thoughtful Deliberation Apple versus Cupcake Hunting Practices of the Ju/'hoansi Why Do We Do That? Appendix to Chapter 2 1. Anchors 2. Confirmation Bias 3. Overconfidence Effect 4. Availability Heuristic Part 2: Social Preferences and Pro-Social Behavior Chapter 3. Social Norms: Sharing and Enforcement 1. Utility Maximization with a Social Norm Utility Maximization 2. Sharing Behavior: The Dictator Game Game Structure and Results Variation in Sharing Behavior 3. Costly Norm Enforcement Third-Party Punishment of Norm Violators Structure of the Ultimatum Game A Norm-Sensitive Responder Equilibrium Responder Share A Norm-Sensitive Proposer 4. Results from Ultimatum-Game Experiments Meta-Analysis of Ultimatum Experiments Crosswalk Rules and the Ultimatum Game 5. Market Engagement and Social Norms Chapter 4. Trust 1. The Trust Game: Investment & Production Game Structure Outcome in the Absence of a Sharing Norm 2. A Sharing Norm for the Producer The Producer's Trade-Off: Material Benefit versus Norm-Violation Cost Varying Norm Sensitivity and Return Fractions The Investor Decision 3. A Sharing Norm for the Investor The Investor's Trade-Off: Material Benefit versus Norm-Violation Cost Relative Norm Sensitivity and Equilibrium Social Norms, Efficiency, and Social Capital 4. Experiments and Implications Experimental Results The Trust Game and Social Capital The Trust Game and Oxytocin Chapter 5. Public Goods and Voluntary Contributions 1. Free Riding and Economic Experiments The Free-Rider Problem Results from Voluntary-Contribution Experiments 2. Social Norms and Voluntary Contributions Norm: Efficient Contribution Norm: Equal Contribution Explaining a Path of Decreasing Contributions 3. Punish Free Riders? Punishing Norm Violators Summary of Experimental Results Chapter 6. Identity, Norms, and Reciprocity in the Workplace 1. Worker Reciprocity and Social Capital Perfect or Imperfect Information in the Workplace? Social Norms and Pareto Improvements 2. Worker Identity and Effort Utility-Maximizing Effort Insiders versus Outsiders Norm Sensitivity and Effort Producer Investment in Identity Management 3. Response to a Higher Wage Wages and a Sharing Norm Wages and the Work-Effort Norm Wages and Profit 4. Evidence of Worker Reciprocity Field Experiments A Gift-Exchange Experiment Chapter 7. Voluntary Prices 1. Voluntary Prices: Pay What You Want The Equal-Sharing Price and Norm-Violation Cost Sustainability of PWW Systems Economic Experiment: Pay What You Want versus Pay It Forward 2. Public Broadcasting: Free Riders and Guilt-Tripping Pledge Drives Payoffs to Members and Free Riders Choosing the Length of a Pledge Drive Chapter 8. Imitation and Cultural Learning 1.Imitation and Conformity Over-Imitation by Humans Over-Imitation: Humans versus Chimpanzees Conformity and Matching Pennies 2.Faithful Imitation and Cultural Learning Manioc and Obscure Production Processes Social Learning: Humans versus Chimpanzees Part 3: Time Preferences Chapter 9. Discounting and Present Bias 1. Conventional Discounting and Present Bias The Quasi-Hyperbolic Discount Function Present Bias and Doubling Your Apples Time Inconsistency Time Inconsistency and the Relative Values of Bundles Present Bias and Regret 2. Estimates of Discounting Parameters Estimates of Conventional Discounting and Present Bias Economic Experiment: Patience among Mothers and Children 3. Illustrations: Cupcake, Weed, Bucket List Cupcake versus Apple Homeowner versus Weed The Bucket List Chapter 10. Time Preferences and Saving 1. Discounting and Intertemporal Choice Saving and the Equimarginal Principle Present Bias and Regret 2. Saving Mandates and Nudges Response to Mandate: Active Saver Response to Mandate: Non-Saver Nudges: Defaults, Save More Tomorrow, and Saving Lotteries Clueless versus Savvy Consumers Three-Period Model of Intertemporal Choice Consumption Path of the Clueless (Naif) Regret of the Clueless Consumption Path of a Savvy Consumer Commitment Devices and Saving 4. Present Bias and Pre-Commitment by Pigeons Chapter 11. When to Act 1. Procrastination: Waiting Too Long Present Bias and a Clueless Decision-Maker Conditions for Procrastination 2. Self-Awareness and Procrastination Backward Induction Evidence of Present Bias and Self-Awareness Clueless versus Self-Aware: How to Tell the Difference 3. Preproperation: Acting Too Soon Present Bias and a Clueless Decision-Maker Conditions for Preproperation 4. Self Awareness and Preproperation Backward Induction Is Being Clueless Better? Chapter 12. Application of Present Bias--Sin Taxes and Fertilizer 1. Personally Harmful Products and Sin Taxes A Model of a Personally Harmful Good Present Bias and a Personally Harmful Good Savvy Consumers and Hobbling Support for Sin Taxes 2. Present Bias and Fertilizer Investment Review of Intertemporal Choice Model Present Bias and the Fertilizer Investment Policy Options: Subsidy versus Nudge Part 4: Mental Accounting and the Endowment Effect Chapter 13. Mental Accounting for Consumers 1. Mental Accounting and Fungibility Consumer Budgets and Fungibility Mental Accounting and Coupons 2. Other Implications of Consumer Mental Accounting Mental Accounting and Sunk Cost Decoupling Cost and Benefit: Credit Cards and Ride-Hailing Services Regular versus Premium Gasoline Chapter 14. Loss versus Gain 1. Asymmetric Influences of Loss and Gain The Greater Weight of Loss Measuring the Greater Weight of Loss Reappraisal and the Weight of Loss 2. The Endowment Effect Willingness to Pay versus Willingness to Accept Classic Endowment Experiment Evidence for the Endowment Effect Endowment Effect for Chimpanzees and Capuchin Monkeys The Endowment Effect and Exchange Greater Weight of Loss and Loss Aversion Part 5: Risk Preferences and Decisions in Uncertain Environments Chapter 15. Risk Preferences and Prospect Theory 1. Features of Prospect Theory Utility Function for Prospect Theory Utility Value and Certainty Equivalent 2. Risk Aversion and Risk Neutrality Risk Aversion and the Risk Premium Risk Neutrality: Linear Utility and No Loss Aversion Sources of Risk Aversion 3. The Values of Key Parameters Relative Weight of Loss Decreasing Sensitivity to Gain and Loss Measuring Sensitivity to Stimulus Economic Experiment: Risk Preferences and Cognitive Ability 4. Risk Preferences of Rats Chapter 16. Problems with Probability 1. Probability in Prospect Theory Prelec Probability Weighting Psychological Foundations A Closer Look at Rare Events 2. Learning by Description versus Learning by Experience 3. Solving Puzzles with Probability Weighting The Numbers Game Puzzle The Longshot Puzzle Chapter 17. Prospect Theory & Asset Markets 1.Decreasing Sensitivity and Attitudes toward Risk Decreasing Sensitivity to Gain and Risk Aversion Decreasing Sensitivity to Loss and Risk Seeking Constant Sensitivity and Risk Neutrality 2. The Disposition Puzzle Reservation Price in a Winner Market Reservation Price in a Loser Market Reservation Prices and Time on the Market Evidence for the Disposition Puzzle 3. Disposition Puzzle Disappears? Let Bygones be Bygones Constant Sensitivity to Gain and Loss 4. The Equity Premium Puzzle Greater Weight of Loss and Loss Aversion Loss Aversion Solves the Equity Premium Puzzle Professional Traders: Too Much Information? Chapter 18. Prospect Theory and Insurance 1. Decreasing Sensitivity and the Willingness to Pay for Insurance Decreasing Marginal Disutility of Loss Certainty Equivalent and Willingness to Pay for Insurance Willingness to Pay for Insurance versus Break-Even Price Economic Experiment: Willingness to Pay for Insurance 2. Probability Weighting and Insurance Puzzles Decreasing Sensitivity and Probability Weighting The Hazard-Insurance Puzzle The Insurance-Deductible Puzzle Chapter 19. Reference Points and Goals 1. Goals and the Marginal Principle Goal-Related Marginal Benefit Full Marginal Benefit and Choice Goals on the Golf Course 2. Applications: Rainy Day Taxis and Abstinence Applications: Rainy-Day Taxis and Abstinence Rainy-Day Taxis Inefficiency and a Pareto Improvement Abstinence Part 6: Natural Selection and Culture Chapter 20. Natural Selection and Co-Evolution of Genes and Culture 1. Background Concepts from Evolutionary Biology DNA, Genetic Mutations, and Natural Selection Illustration: A Fire-Building Manual 2. A Closer Look at Fitness and Evolution Fitness, Natural Selection, and Evolution Fitness Contests and Geometric Mean Fitness Economics versus Biology: Spider Somersaults 3. Genes, Environment, Norms, Culture, and Cognition Genes and the Environment Genes and Culture Genes and Social Norms Instinctive Urges versus Thoughtful Deliberation Chapter 21. Cooperation 1. Humans versus Chimpanzees Cooperation: Skills and Motivation Sharing Bearing a Cost to Enforce Norms 2. Consumption and Production Benefits of Cooperation Benefits from Consumption Smoothing Benefits from Economies of Scale 3. Co-Evolution of Genes and Culture Genes and Culture Cultural Learning Chapter 22. Loss Aversion and Time Preferences 1. Natural Selection and Loss Aversion Steady versus Fluctuating Reproduction Gain Equals the Loss Gain Exceeds the Loss Fitness Equivalence Environmental Conditions and Genetic Mixes 2. Natural Selection, Culture, and Time Preferences Trade-Offs from Investment Low Investment Productivity High Investment Productivity Lessons from Historical Data Chapter 23. Natural Selection and Risk Preferences 1. Small Reward and Risk Aversion Geometric Mean Fitness Natural Selection and Risk Aversion 2. Large Reward and Risk Neutrality Greater Fitness for Risk Takers Natural Selection Favors Risk Taking Fitness Equivalence Risk Aversion in Bonobos, Shrews, and Other Creatures 3.Subsistence and Risk Seeking Subsistence and Risk Preferences The Flexible Risk Preferences of Juncos Chapter 24. Bargaining and the Endowment Effect 1. A Hunter-Gatherer Exchange Economy Hunter-Gatherer Fitness Edgeworth Box and Gains from Exchange Bargaining and Equilibrium 2. Natural Selection: Bargaining Outcomes Endowment Effect and Nash Equilibrium Disagreement Value and the Nash Bargaining Solution The Endowment Effect and Group Fitness Egalitarian Economy and the Endowment Effect Glossary References Index
