TY  - JOUR
AU  - DellaVigna,Stefano
TI  - Psychology and Economics: Evidence from the Field
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13420
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13420
L1  - http://www.nber.org/papers/w13420.pdf
N1  - Author contact info:
Stefano DellaVigna
University of California, Berkeley
Department of Economics
549 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: 510/643-0715
Fax: 510/642-6615
E-Mail: sdellavi@econ.berkeley.edu
AB  - The research in Psychology and Economics (a.k.a. Behavioral Economics) suggests that individuals deviate from the standard model in three respects: (i) non-standard preferences; (ii) non-standard beliefs; and (iii) non-standard decision-making. In this paper, I survey the empirical evidence from the field on these three classes of deviations. The evidence covers a number of applications, from consumption to finance, from crime to voting, from giving to labor supply. In the class of non-standard preferences, I discuss time preferences (self-control problems), risk preferences (reference dependence), and social preferences. On non-standard beliefs, I present evidence on overconfidence, on the law of small numbers, and on projection bias. Regarding non-standard decision-making, I cover limited attention, menu effects, persuasion and social pressure, and emotions. I also present evidence on how rational actors -- firms, employers, CEOs, investors, and politicians -- respond to the non-standard behavior described in the survey. I then summarize five common empirical methodologies used in Psychology and Economics. Finally, I briefly discuss under what conditions experience and market interactions limit the impact of the non-standard features.
ER  -