The foundations of behavioral economic analysis /Sanjit Dhami.

Includes bibliographies and index.

"This is the first definitive introduction to behavioral economics aimed at advanced undergraduate and postgraduate students. Authoritative, cutting edge, yet accessible, it guides the reader through theory and evidence, providing engaging and relevant applications throughout."--Provided by publisher

Cover -- The Foundations of Behavioral Economic Analysis -- Copyright -- Dedication -- PREFACE AND ACKNOWLEDGMENTS -- CONTENTS -- LIST OF FIGURES -- LIST OF TABLES -- Introduction -- 1 The antecedents of behavioral economics -- 2 On methodology in economics -- 3 The experimental method in economics -- 3.1 Experiments and internal validity -- 3.2 Subject pools used in lab experiments -- 3.3 Stake sizes in experiments -- 3.4 The issue of the external validity of lab findings -- 3.5 The role of incentives in economics -- 3.6 Is survey data of any use? -- 4 Approach and organization of the book

5 Five theoretical approaches in behavioral economics -- 5.1 A case study of prospect theory -- 5.2 Human sociality and inequity averse preferences -- 5.3 The quasi-hyperbolic model and self-control problems -- 5.4 Level-k and CH models: disequilibrium in beliefs in strategic interaction -- 5.5 The heuristics and biases program: radical behavioral economics -- 6 Five examples of behavioral evidence -- 6.1 Does competitive market equilibrium survive fairness considerations? -- 6.2 Why do we not let bygones be bygones? -- 6.3 Are financial markets efficient?

6.4 Is expert behavior consistent with neoclassical economics? -- 6.5 Do people play a mixed strategy Nash equilibrium? -- Appendix A: The random lottery incentive mechanism -- Appendix B: In lieu of a problem set -- References -- PART 1: Behavioral Economics of Risk, Uncertainty, and Ambiguity -- Introduction to part 1 -- CHAPTER 1: The Evidence on Human Choice under Risk and Uncertainty -- 1.1 Introduction -- 1.2 The elements of classical decision theory -- 1.2.1 Preference foundations of expected utility theory (EU) -- 1.2.2 Attitudes to risk under EU

1.3 Subjective expected utility theory (SE -- 1.4 Eliciting the utility function under EU -- 1.4.1 The case of known probabilities -- 1.4.2 The case of unknown probabilities -- 1.5 Violations of expected utility theory -- 1.5.1 Violations of the independence axiom -- 1.5.2 The probability triangle and violations of the axioms of rationality -- 1.5.3 Some attempts to relax the independence axiom -- 1.5.4 Attitudes to risk for small and large stakes: Rabin's paradox -- 1.5.5 Violations of description invariance -- 1.5.6 Preference reversals -- 1.5.7 Is the reduction axiom supported by the evidence?

CHAPTER 2: Behavioral Models of Decision Making -- 2.1 Introduction -- 2.2 Probability weighting functions -- 2.2.1 Prelec's probability weighting function -- 2.2.2 Stochastic dominance under non-linear probability weighting -- 2.3 Rank dependent utility theory (RDU) -- 2.3.1 Attitudes to risk under RDU -- 2.3.2 RDU under uncertainty -- 2.3.3 Drawbacks of RDU -- 2.4 Prospect theory (PT) -- 2.4.1 A brief note on PT under uncertainty -- 2.4.2 Attitudes to risk under prospect theory -- 2.4.3 A violation of EU and RDU that can be explained by PT -- 2.4.4 Some erroneous criticisms of PT -- 2.5 Elicitation of utility and probability weighting functions in PT

This is the first definitive introduction to behavioral economics aimed at advanced undergraduate and postgraduate students. Authoritative, cutting edge, yet accessible, it guides the reader through theory and evidence, providing engaging and relevant applications throughout.

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