Psychology and Economics: Evidence from the Field

Contribution: 
Research article
Keywords: 
Economic psychology
behavioural economics
rational choice
deviations from RCT
meta - analysis
deception
Reference: 
DellaVigna, S. (2009). Psychology and Economics: Evidence from the Field. Journal of Economic Literature, 47(2), 315-372. doi: 10.1257/jel.47.2.315
Summary / Abstract: 

This is a good meta-analysis of devitations from Rational Choice and research in this field. Abstract below. Attached is a working paper version from the National Bureau of Economic Research (http://www.nber.org/papers/w13420).

The research in Psychology and Economics (a.k.a. Behavioral Economics) suggests that individuals deviate from the standard model in three respects: (1) nonstandard preferences, (2) nonstandard beliefs, and (3) nonstandard decision making. In, this paper, I survey the empirical evidence from the field on these three classes of deviations. The evidence covers a number of applications, from consumption to finance, from crime to voting, from charitable giving to labor supply. In the class of nonstandard preferences, I discuss time preferences (self-control problems), risk preferences (reference dependence), and social preferences. On nonstandard beliefs, I present evidence on over-confidence, on the law of small numbers, and on projection bias. Regarding nonstandard decision, making, I cover framing, limited attention, menu effects, persuasion and social pressure, and emotions. I also present evidence on how rational actors-firms, employers, CEOs, investors, and politicians-respond to the nonstandard behavior described in, the survey. Finally, I briefly discuss under what conditions experience and,market interactions limit the impact of the nonstandard features.