Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
Psychology and Economics: Evidence from the Field
Journal of Economic Literature
vol. 47,
no. 2, June 2009
(pp. 315–72)
Abstract
The research in Psychology and Economics (a.k.a. Behavioral Economics) suggests that individuals deviate from the standard model in three respects: (1) nonstandard preferences, (2) nonstandard beliefs, and (3) nonstandard 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 charitable giving to labor supply. In the class of nonstandard preferences, I discuss time preferences (self-control problems), risk preferences (reference dependence), and social preferences. On nonstandard beliefs, I present evidence on overconfidence, on the law of small numbers, and on projection bias. Regarding nonstandard decision making, I cover framing, 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 nonstandard behavior described in the survey. Finally, I briefly discuss under what conditions experience and market interactions limit the impact of the nonstandard features.Citation
DellaVigna, Stefano. 2009. "Psychology and Economics: Evidence from the Field." Journal of Economic Literature 47 (2): 315–72. DOI: 10.1257/jel.47.2.315JEL Classification
- A12 Relation of Economics to Other Disciplines
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making