Richard H. Thaler

Mental Accounting and Consumer Choice

В статье профессора экономики Ричарда Тейлера представлена модель потребительского поведения, основанная на комбинации когнитивной психологии и микроэкономики. В основе этой модели лежит психологическая теория принятия решений в условиях риска ( «Prospect Theory»), разработанная психологами Кахнеманом и Тверским (в 2002 г. Даниэль Кахнеман за разработку теории поведения в условиях риска получил Нобелевскую премию по экономике; интересный факт – его работы финансировались министерством обороны США, и, конкретно, тем же ведомством, что финансировало первоначальные оборонные разработки Интернета). Построение модели начинается с концепции ментального подсчета выгод и издержек с помощью функции ценности (value function), заимствованной из теории принятия решений в условиях риска. Оценка потребителями покупки моделируется с помощью функции «трансакционной полезности» (transaction utility). Завершает модель ментальных расчетов «процесс семейного бюджетирования». Исходя из своей модели потребительского поведения, автор разрабатывает рекомендации для маркетинга, в частности, в области ценообразования.

Toward a positive theory of consumer choice

The economic theory of the consumer is a combination of positive and normative theories. Since it is based on a rational maximizing model it describes how consumers should choose, but it is alleged to also describe how they do choose. This paper argues that in certain well-defined situations many consumers act in a manner that is inconsistent with economic theory. In these situations economic theory will make systematic errors in predicting behavior. Kanneman and Tverseys prospect theory is proposed as the basis for an alternative descriptive theory. Topics discussed are: undeweighting of opportunity costs, failure to ignore sunk costs, scarch behavior choosing not to choose and regret, and precommitment and self-control.

Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias

A speaker enclosure which is particularly useful for stereophonic applications, but which also provides superior sound reproduction from monophonic sources. A reduction in size of the usual stereophonic speaker system is accomplished without sacrificing sound quality or stereo effect. Full bass reproduction is obtained from a small source, and the reflective properties of room surfaces, such as the walls and the ceiling, are taken advantage of, to enhance the sound dispersion capabilities of the system by reflective reinforcement.

Mental accounting matters

Mental accounting is the set of cognitive operations used by individuals and households to organize, evaluate, and keep track of financial activities. Making use of research on this topic over the past decade, this paper summarizes the current state of our knowledge about how people engage in mental accounting activities. Three components of mental accounting receive the most attention. This first captures how outcomes are perceived and experienced, and how decisions are made and subsequently evaluated. The accounting system provides the inputs to be both ex ante and ex post cost–benefit analyses. A second component of mental accounting involves the assignment of activities to specific accounts. Both the sources and uses of funds are labeled in real as well as in mental accounting systems. Expenditures are grouped into categories (housing, food, etc.) and spending is sometimes constrained by implicit or explicit budgets. The third component of mental accounting concerns the frequency with which accounts are evaluated and ‘choice bracketing’. Accounts can be balanced daily, weekly, yearly, and so on, and can be defined narrowly or broadly. Each of the components of mental accounting violates the economic principle of fungibility. As a result, mental accounting influences choice, that is, it matters. Copyright

Fairness and the Assumptions of Economics

The advantages and disadvantages of expanding the standard economic model by more realistic behavioral assumptions have received much attention. The issue raised in this article is whether it is useful to complicate-or perhaps to enrichthe model of the profit-seeking firm by considering the preferences that people have for being treated fairly and for treating others fairly. The absence of considerations of fairness and loyalty from standard economic theory is one of the most striking contrasts between this body of theory and other social sciences-and also between economic theory and lay intuitions about human behavior. Actions in many domains commonly conform to standards of decency that are more restrictive than the legal ones: the institutions of tipping and lost-and-found offices rest on expectations of such actions. Nevertheless, the standard microeconomic model of the profitmaximizing firm assigns essentially no role to The traditional assumption that fairness is irrelevant to economic analysis is questioned. Even profit-maximizing firms will have an incentive to act in a manner that is perceived as fair if the individuals with whom they deal are willing to resist unfair transactions and punish unfair firms at some cost to themselves. Three experiments demonstrated that willingness to enforce fairness is common. Community standards for actions affecting customers, tenants, and employees were studied in telephone surveys. The rules of fairness, some of which are not obvious, help explain some anomalous market phenomena. * The research for this paper was supported by the Department of Fisheries and Oceans Canada. Kahneman and Thaler were also supported, respectively, by the U.S. Office of Naval Research and by the Alfred P. Sloan Foundation. Conversations with J. Brander, R. Frank, and A. Tversky were very helpful. We also thank Leslie McPherson and Daniel Treisman for their assistance. The paper presented at the conference and commented on by the discussants included a detailed report of study 3, which is only summarized here. It did not contain study 1, which was incomplete at the time. Daniel Kahneman is now in the Department of Psychology, University of California, Berkeley 94720.

Some empirical evidence on dynamic inconsistency

Abstract Individual discount rates are estimated from survey evidence. For gains, they are found to vary inversely with the size of the reward and the length of time to be waited. Rates are found to be much smaller for losses that for gains.

Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving

As firms switch from defined‐benefit plans to defined‐contribution plans, employees bear more responsibility for making decisions about how much to save. The employees who fail to join the plan or who participate at a very low level appear to be saving at less than the predicted life cycle savings rates. Behavioral explanations for this behavior stress bounded rationality and self‐control and suggest that at least some of the low‐saving households are making a mistake and would welcome aid in making decisions about their saving. In this paper, we propose such a prescriptive savings program, called Save More Tomorrow™ (hereafter, the SMarT program). The essence of the program is straightforward: people commit in advance to allocating a portion of their future salary increases toward retirement savings. We report evidence on the first three implementations of the SMarT program. Our key findings, from the first implementation, which has been in place for four annual raises, are as follows: (1) a high proportion (78 percent) of those offered the plan joined, (2) the vast majority of those enrolled in the SMarT plan (80 percent) remained in it through the fourth pay raise, and (3) the average saving rates for SMarT program participants increased from 3.5 percent to 13.6 percent over the course of 40 months. The results suggest that behavioral economics can be used to design effective prescriptive programs for important economic decisions.

Libertarian Paternalism Is Not An Oxymoron

The idea of libertarian paternalism might seem to be an oxymoron, but it is both possible and legitimate for private and public institutions to affect behavior while also respecting freedom of choice. Often peoples preferences are ill-formed, and their choices will inevitably be influenced by default rules, framing effects, and starting points. In these circumstances, a form of paternalism cannot be avoided. Equipped with an understanding of behavioral findings of bounded rationality and bounded self-control, libertarian paternalists should attempt to steer peoples choices in welfare-promoting directions without eliminating freedom of choice. It is also possible to show how a libertarian paternalist might select among the possible options and to assess how much choice to offer. Examples are given from many areas, including savings behavior, labor law, and consumer protection.

A Behavioral Approach to Law and Economics

Economic analysis of law usually proceeds under the assumptions of neoclassical economics. But empirical evidence gives much reason to doubt these assumptions; people exhibit bounded rationality, bounded self-interest, and bounded willpower. This article offers a broad vision of how law and economics analysis may be improved by increased attention to insights about actual human behavior. It considers specific topics in the economic analysis of law and proposes new models and approaches for addressing these topics. The analysis of the article is organized into three categories: positive, prescriptive, and normative. Positive analysis of law concerns how agents behave in response to legal rules and how legal rules are shaped. Prescriptive analysis concerns what rules should be adopted to advance specified ends. Normative analysis attempts to assess more broadly the ends of the legal system: Should the system always respect peoples choices? By drawing attention to cognitive and motivational problems of both citizens and government, behavioral law and economics offers answers distinct from those offered by the standard analysis.

The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test

Myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently. Two implications of myopic loss aversion are tested experimentally. 1. Investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often. 2. If all payoffs are increased enough to eliminate losses, investors will accept more risk. In a task in which investors learn from experience, both predictions are supported. The investors who got the most frequent feedback (and thus the most information) took the least risk and earned the least money.