What is Behavioral Economics?

Behavioral economics is a practical economics. It combines behavioral analysis theory with the laws of economic operation, psychology, and economic science to discover errors or omissions in today's economic models, and then to modify the rationality of mainstream economics about people Insufficient basic assumptions, self-interest, complete information, utility maximization, and preference consistency. Behavioral economics is not new in mainstream western economics, but it has been silent for decades from the 1950s to the 1990s.

Behavioral economics

(Subject of Economics)

Behavioral economics is not new in mainstream western economics, but it has been silent for decades from the 1950s to the 1990s.

2000-2005 period

2002 was a sign. Psychologist Daniel Kahneman (hereafter called Kahneman) and economist Vernon L. Smith shared the year s

Callerman and

Some people avoid risk while chasing risk. It is difficult for traditional economics to explain this phenomenon. For example, many people buy insurance. Although unfortunately, it is a small probability event, everyone still wants to avoid this risk. On the other hand, these people also bought lotteries to bet on horses and drag slot machines. Although winning money is also a small probability event, but everyone still wants to take this risk at this time.

Before introducing the theory of mind accounts informally, let's look at two examples cited by Staller.

Staller said that he had a friend, a professor of finance, and usually claimed to be very rational. One day, Staller asked him how to deal with minor disasters in life. He said that he gave charities like United Way at the beginning of each year Set a donation limit, say, 5,000 yuan. Then, whenever something goes wrong in my life and I encounter bad luck, such as eating a ticket, I deduct money from this amount. Donate as much money as you have at the end of the year. He thought it was great. (I also think it is a good way)

Steller also gave his own example. He said that he and his wife were invited to give lectures in Switzerland one year, and then spent a week there at their own expense. At that time, the Swiss franc was not strong enough. Fortunately, there was a fee for teaching and it could be used to pay for travel expenses. Steller went on to say that suppose he went to New York to give a lecture, received the same amount of payment, and then came

The four conclusions of Mental Accounting are about how to combine ( consolidate multiple economic activities into one account) and single-row (decompose one or more economic activities into multiple accounts) psychological accounts. Mergers make people feel a lot better in pain and loss, and single columns make people feel better without adding real economic benefits.

Let's introduce these four conclusions one by one.

First conclusion:

If there are multiple economic activities that involve benefits / sweetness / benefits, list them as much as possible.

Experimental example: Lao Niu won a 75 lottery football ticket.

Lao Zhu won a 50 football lottery and a 25-block welfare lottery.

Who is better?

Most people say Lao Zhu Shuang.

Explanation: Stoner added transaction utility to the mind account theory, that is, the utility (positive or negative) that each economic activity brings. The multiple economic activities involving profit after a single column provide multiple positive transaction effects. Of course, winning two times is certainly better than winning one time. Remember the foreground theory, which can also explain the conclusion one: According to the S curve, because the utility of returns is diminishing marginally, U (A) + U (B) & gt; U (A + B).

Life application: I have never heard of anyone who puts all Christmas gifts in one box. You can pack as many boxes as you like.

Commercial applications: Advertising by businesses, especially TV ads for housewives. Those that allow you to make 800 calls for a limited time and send free items for shopping generally give you a few bargains instead of an expensive one.

Second conclusion:

If there are multiple economic activities that involve expenditures / losses / bads / disasters, merge them as much as possible.

Experimental example: One day the old cow hit a bumper in the reverse and repaired 1,400 yuan; that day, he ate a ticket for speeding at 120 yuan, and ran a parking ticket for 40 yuan.

Lao Zhu hit the bumper in the reverse and the repair cost was 1,600 yuan.

Who is more upset about them?

Needless to say? Of course, the old cow is even more upset.

Explanation: The account theory is still explained by transaction utility. Economic activity after a single column provides multiple negative transaction effects (it's certainly more unpleasant to go back and forth than to go back to it once). Prospect theory can also be explained. Because the utility of the loss is also diminishing marginally, U (-A) + U (-B) & lt; U (-AB).

Life application: Do nt report to the leader / wife one by one if you have a lot of bad luck, just report the total number. Leader / wife, master the big direction to manage big problems, don't bother her with small details.

Commercial applications: This is how the options on your car are sold to you. An experienced car salesman often quotes the total price of an option, instead of emphasizing the price of an option alone, so that you feel that compared with the base model, the total cost is not much.

Promotion, when the company sells expensive things, create options and sell them to customers as much as possible (when someone in the shoe store sells shoe polish to you, most of the shoes you bought are at 200 Blocks above), beeping, customers fell down under the heavy firepower of the second conclusion of mind account theory.

Third conclusion:

If there is an economic activity that involves expenditure / loss, find another economic activity that has a profit and the profit exceeds the aforementioned loss, and merge them.

Experimental example: Lao Niu and other bosses make bonuses, which is estimated to be 300 yuan. The bonus is in hand, oh yeah, it really is 300 yuan. But a week later, HR called and said that the prize money was wrong, and asked the cow to return 50 yuan.

Lao Zhu also waited for the boss to make a bonus, and it was estimated that it was 300 yuan. But a week later, the prize money was only 250 yuan.

Who is more upset about them?

Most people think that this time the old cow is more unhappy (again the old cow!)

Explanation: Same as the second conclusion.

Life application: If you do nt report bad news to the leader / wife, it must be wrong (and there is danger to your life); if you report good news, you can also do better. Hereby remind the majority of middle-aged and elderly male netizens: Good news and happy events should not be reported to leaders easily. You must wait until bad things come together and report them together. At the same time, remind a few teenage friends, don't rush to confess bad things to your parents, wait for good things to come together and report. what? Can't find something good? You're done!

Business applications: Deducting expenses from income is more acceptable than directly incurring expenses. This is widely used to deduct a part of the monthly income to pay for various commercial insurance and installments (of course, installments have another mechanism to play with, let's talk about it in detail)

Fourth conclusion:

If an economic activity involves a large expenditure / loss, and at the same time an economic activity reduces the loss a little, list the economic activity.

The fourth conclusion is also called the silver lining conclusion.

Experimental example: Lao Niu stocks lost 4,900 yuan one day.

Lao Zhu's stocks lost 5,000 yuan one day. But he picked up 100 yuan on the way home.

Who is more upset about them?

Why is it still an old cow? (Reason: The account theory is not well understood.)

Explanation: Refer to the S-curve of the foreground theory.

Life application: To be good at finding the flash point in the total loss of adversity and despair, even if it is just one point, find it out.

Commercial application: Mail-in Rebate. Buy big items, pay first, and give you some money back, please? (Another mechanism of Rebate is that up to half of the people actually apply for rebate).

This concludes the four conclusions of the mind account theory. Did you see that there was something in my heart, or did you just realize it? Good for your life.