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• Title Page
• Copyright
• Brief Contents
• Contents
• Preface
• Who Should Use this Book
• Philosophy
• A Short Word on Experiments
• Acknowledgments
• Chapter 1: Rationality, Irrationality, and Rationalization
• Rational Choice Theory and Rational Modeling
• Rationality and Demand Curves
• Bounded Rationality and Model Types
• Special Relationship between Behavioral Economics and Experimental Economics
• Biographical Note: Herbert A. Simon
• Thought Questions
• References
• Advanced Concept: Deriving Demand Curves
• Part I: Consumer Purchasing Decisions
• Chapter 2: Transaction Utility and Consumer Pricing
• Rational Choice with Fixed and Marginal Costs
• Fixed versus Sunk Costs
• The Sunk Cost Fallacy
• Theory and Reactions to Sunk Cost
• History and Notes
• Rational Explanations for the Sunk Cost Fallacy
• Transaction Utility and Flat-Rate Bias
• Procedural Explanations for Flat-Rate Bias
• Rational Explanations for Flat-Rate Bias
• History and Notes
• Transaction Utility and Consumer Preferences in Reference
• Theory and Reference-Dependent Preferences
• Rational Explanations for Context-Dependent Preferences
• Biographical Note: Richard H. Thaler
• Thought Questions
• References
• Advanced Concept: Fixed Costs and Rational Choice
• Chapter 3: Mental Accounting
• Rational Choice with Income from Varying Sources
• The Theory of Mental Accounting
• Budgeting and Consumption Bundles
• Accounts, Integrating, or Segregating
• Payment Decoupling, Prepurchase, and Credit Card Purchases
• Investments and Opening and Closing Accounts
• Reference Points and Indifference Curves
• Rational Choice, Temptation and Gifts versus Cash
• Budgets, Accounts, Temptation, and Gifts
• Rational Choice over Time
• Rational Explanations for Source-Based Consumption and Application
• Biographical Note: George F. Loewenstein
• Thought Questions
• References
• Chapter 4: Status Quo Bias and Default Options
• Rational Choice and Default Options
• Preference Formation, Framing, and the Default Option
• Rational Explanations of the Status Quo Bias
• History and Notes
• Reference Points, Indifference Curves, and the Consumer Problem
• An Evolutionary Explanation for Loss Aversion
• Rational Choice and Getting and Giving Up Goods
• Loss Aversion and the Endowment Effect
• Rational Explanations for the Endowment Effect
• History and Notes
• Biographical Note: Amos N. Tversky
• Thought Questions
• References
• Advanced Concept: The Shape of Indifference Curves with Constant Loss Aversion
• Chapter 5: The Winner’s Curse and Auction Behavior
• Rational Bidding in Auctions
• Procedural Explanations for Overbidding
• Levels of Rationality
• Bidding Heuristics and Transparency
• Rational Bidding under Dutch and First-Price Auctions
• History and Notes
• Rational Prices in English, Dutch, and First-Price Auctions
• Auction with Uncertainty
• Rational Bidding under Uncertainty
• The Winner’s Curse and Anchoring and Adjusting
• History and Notes
• Rational Explanations for the Winner’s Curse
• Biographical Note: Matthew Rabin
• Thought Questions
• References
• Advanced Concept: Bayesian Nash Equilibrium and Bidding under Uncertainty
• Part 2: Information and Uncertainty
• Chapter 6: Bracketing Decisions
• Multiple Rational Choice with Certainty and Uncertainty
• The Portfolio Problem
• Narrow versus Broad Bracketing
• Bracketing the Portfolio Problem
• More than the Sum of Its Parts
• The Utility Function and Risk Aversion
• Bracketing and Variety
• Rational Bracketing for Variety
• Changing Preferences, Adding Up, and Choice Bracketing
• Addiction and Melioration
• Narrow Bracketing and Motivation
• Behavioral Bracketing
• History and Notes
• Rational Explanations for Bracketing Behavior
• Biographical Note: Drazen Prelec
• Thought Questions
• References
• Advanced Concept: The Portfolio Problem
• Advanced Concept: Bracketing the Portfolio Problem
• Chapter 7: Representativeness and Availability
• Statistical Inference and Information
• Calibration Exercises
• Representativeness
• Conjunction Bias
• The Law of Small Numbers
• Conservatism versus Representativeness
• Availability Heuristic
• Bias, Bigotry, and Availability
• History and Notes
• Biographical Note: Daniel Kahneman
• Thought Questions
• References
• Chapter 8: Confirmation and Overconfidence
• Rational Information Search
• Confirmation Bias
• Risk Aversion and Production
• Overconfidence
• Self-Serving Bias
• Is Bad Information Bad?
• History and Notes
• Biographical Note: Colin F. Camerer
• Thought Questions
• References
• Chapter 9: Decision under Risk and Uncertainty
• Rational Decision under Risk
• Modeling Intransitive Preferences: Regret and Similarity
• Independence and Rational Decision under Risk
• Allowing Violations of Independence
• The Shape of Indifference Curves
• Evidence on the Shape of Probability Weights
• Probability Weights without Preferences for the Inferior
• Practical Implications of Violations of Expected Utility
• What to Do When You Don’t Know What Can Happen
• History and Notes
• Biographical Note: Maurice Felix Charles Allais
• Thought Questions
• References
• Advanced Concept: The Continuity Axiom
• Chapter 10: Prospect Theory and Decision under Risk or Uncertainty
• Risk Aversion, Risk Loving, and Loss Aversion
• Prospect Theory
• Prospect Theory and Indifference Curves
• Does Prospect Theory Solve the Whole Problem?
• Prospect Theory and Risk Aversion in Small Gambles
• History and Notes
• Biographical Note: Peter P. Wakker
• Thought Questions
• References
• Part 3: Time Discounting and the Long and Short Run
• Chapter 11: Disagreeing with Ourselves: Projection and Hindsight Biases
• The Standard Models of Intertemporal Choice
• Making Decisions for Our Future Self
• Projection Bias and Addiction
• The Role of Emotions and Visceral Factors in Choice
• Modeling the Hot–Cold Empathy Gap
• Hindsight Bias and the Curse of Knowledge
• History and Notes
• Biographical Note: Dan Ariely
• Thought Questions
• References
• Chapter 12: Naïve Procrastination
• The Fully Additive Model
• Discounting in Continuous Time
• Why Would Discounting Be Stable?
• Naïve Hyperbolic Discounting
• Naïve Quasi-Hyperbolic Discounting
• The Common Difference Effect
• The Absolute Magnitude Effect
• Discounting with a Prospect-Theory Value Function
• History and Notes
• Biographical Note: Robert H. Strotz
• Thought Questions
• References
• Chapter 13: Committing and Uncommitting
• Rationality and the Possibility of Committing
• Commitment under Time Inconsistency
• Choosing When to Do It
• Of Sophisticates and Naïfs
• Uncommitting
• History and Notes
• Biographical Note: David Laibson
• Thought Questions
• References
• Advanced Concept: The Continuous Choice Problem with Backward Induction
• Part 4: Social Preferences
• Chapter 14: Selfishness and Altruism
• Rationality and Altruism
• Rationally Selfless?
• Selfishly Selfless
• Public Goods Provision and Altruistic Behavior
• History and Notes
• Biographical Note: Robert H. Frank
• Thought Questions
• References
• Chapter 15: Fairness and Psychological Games
• Inequity Aversion
• Holding Firms Accountable in a Competitive Marketplace
• Fairness
• Kindness Functions
• Psychological Games
• History and Notes
• Biographical Note: Ernst Fehr
• Thought Questions
• References
• Chapter 16: Trust and Reciprocity
• Of Trust and Trustworthiness
• Trust in the Marketplace
• Trust and Distrust
• Reciprocity
• History and Notes
• Biographical Note: Paul Slovic
• Thought Questions
• References
• Glossary
• Index