Behavioral economics
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Behavioral financial markets is a model of financial markets in the behavioral economics context. There follow assumptions of how the effects of psychological, social, cognitive, and emotional factors influence on the economic decisions of individuals and institutions and the consequences for market prices, returns, and resource allocation, although not always that narrowly, but also more generally, of the impact of different kinds of behavior, in different environments of varying experimental values.
Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory; in so doing, these behavioral models cover a range of concepts, methods, and fields.[2][3] Behavioral economics is sometimes discussed as an alternative to neoclassical economics.[citation needed]
The study of behavioral economics includes how market decisions are made and the mechanisms that drive public choice. There are three prevalent themes in behavioral finances:
- Heuristics: People often make decisions based on approximate rules of thumb and not strict logic.
- Framing: The collection of anecdotes and stereotypes that make up the mental emotional filters individuals rely on to understand and respond to events.
- Market inefficiencies: These include mis-pricings and non-rational decision making.
Note: Study more the relation with behavioral game theory.
See also
Material
Papers
- Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. The American economic review, 93(5), 1449-1475.
- Mullainathan, S., & Thaler, R. H. (2000). Behavioral economics (No. w7948). National Bureau of Economic Research.
- Posner, R. A. (1998). Rational choice, behavioral economics, and the law. Stanford Law Review, 1551-1575.
Books
- Camerer, C. F., Loewenstein, G., & Rabin, M. (Eds.). (2011). Advances in behavioral economics. Princeton University Press.