Thinking, Fast and Slow

The Endowment Effect You have probably seen figure 11 or a close cousin of it even if you never had a class in economics. The gr ...

indifference curve. So if A and B are on the same indifference curve for you, you are indifferent between them and will need no ...

indifferent, they toss a coin. Albert gets the raise, Ben gets the extra leisure. Some time passes as the twins get accustomed t ...

history. Correcting that mistake has been one of the achievements of behavioral economics. The Endowment Effect The question of ...

standard economic theory would be puzzled by it. Thaler was looking for an account that could explain puzzles of this kind. Chan ...

exchange of a $5 bill for five singles. There is no loss aversion on either side of routine commercial exchanges. What distingui ...

tokens, of course, had value only because they could be exchanged for the experimenter’s cash; they had no value for use. Then w ...

prices are perceived as too high—when you feel that a seller is taking money that exceeds the exchange value. Brain recordings a ...

very important in the initial acceptance of the ideas of reference point and loss aversi Bon s Aersi Bonon. However, it is well ...

the endowment effect. Being poor, in prospect theory, is living below one’s reference point. There are goods that the poor need ...

“He is a miser, and treats any dollar he spends as a loss.” ...

Bad Events The concept of loss aversion is certainly the most significant contribution of psychology to behavioral economics. Th ...

information about the threat probably traveled via a superfast neural channel that feeds directly into a part of the brain that ...

good ones.” They cite John Gottman, the well-known expert in marital relations, who observed that the long-term success of a rel ...

the streets looking for fares. Economic logic implies that cabdrivers should work many hours on rainy days and treat themselves ...

surprises no one except perhaps some economists, generated a precise and nonintuitive hypothesis and led researchers to a findin ...

produce many winners and some losers while achieving an overall improvement. If the affected parties have any political influenc ...

A hardware store has been selling snow shovels for $15. The morning after a large snowstorm, the store raises the price to $20. ...

substantial majority of respondents believed that it is not unfair for a firm to reduce its workers’ wages when its profitabilit ...

position to retaliate. Furthermore, experiments have shown that strangers who observe unfair behavior often join in the punishme ...