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Behavioral economics as applied to firms: a primer

Mark Armstrong and Steffen Huck

MPRA Paper from University Library of Munich, Germany

Abstract: We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behavior 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; bounded rationality; experimental economics; oligopoly; antitrust (search for similar items in EconPapers)
JEL-codes: C92 D21 D43 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-cbe, nep-com, nep-evo, nep-hpe, nep-mic and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

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