Behavioral Economics as Applied to Firms: A Primer

Mark Armstrong () and Steffen Huck ()

No 2937, CESifo Working Paper Series from CESifo Group Munich

Abstract: We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behaviour in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers, the benefits of employing managers whose objective diverges from profit-maximization (including managers who are overconfident or base pricing decisions on sunk costs), the impact of social preferences on the ability to collude, and the incentive for profit-maximizing firms to mimic irrational behavior.

Keywords: behavioral economics; firms; oligopoly; bounded rationality; collusion (search for similar items in EconPapers)
JEL-codes: D40 L20 L21 (search for similar items in EconPapers)
Date: 2010
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Related works:
Journal Article: Behavioral Economics as Applied to Firms: A Primer (2011)
Journal Article: Behavioral Economics as Applied to Firms: A Primer (2010)
Working Paper: Behavioral economics as applied to firms: a primer (2010)
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