Psychology and Economics: Evidence from the Field

Stefano DellaVigna

No 13420, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The research in Psychology and Economics (a.k.a. Behavioral Economics) suggests that individuals deviate from the standard model in three respects: (i) non-standard preferences; (ii) non-standard beliefs; and (iii) non-standard 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 giving to labor supply. In the class of non-standard preferences, I discuss time preferences (self-control problems), risk preferences (reference dependence), and social preferences. On non-standard beliefs, I present evidence on overconfidence, on the law of small numbers, and on projection bias. Regarding non-standard decision-making, I cover 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 non-standard behavior described in the survey. I then summarize five common empirical methodologies used in Psychology and Economics. Finally, I briefly discuss under what conditions experience and market interactions limit the impact of the non-standard features.

JEL-codes: A1 C91 C93 D00 D64 D91 G1 M3 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-evo, nep-exp, nep-soc and nep-upt
Note: AP IO LS PE POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Published as Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-72, June.
Published as S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
Published as S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.

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