Behavioral Economics as Applied to Firms: A Primer

By Mark Armstrong, Steffen Huck. Social Science Research Network, 2010

177 citations recorded by the source corpus.

We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behaviour in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers, the benefits of employing managers whose objective diverges from profit-maximization (including managers who are overconfident or base pricing decisions on sunk costs), the impact of social preferences on the ability to collude, and the incentive for profit-maximizing firms to mimic irrational behavior.

Subfields: Economics and Econometrics, Management Science and Operations Research, Safety Research

View Paper: https://www.semanticscholar.org/paper/f1e7e23c8bc9e815c927d9b580a81f4e87c55790

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Citations in the corpus

Bounded-Rationality Models: Tasks to Become Intellectually Competitive (2013, background): “(As will become apparent in section 7 below, the modern and more compelling version of this criticism focuses on the dimensionality of the problems neoclassical economics assume 3 A useful introduction to this side of behavioral economics is Armstrong and Huck (2010). agents solve.)”
Do leniency policies facilitate collusion? Experimental evidence (2015, background): “6See Armstrong and Huck (2010) for an overview of the behavioral literature as applied to rms' conduct in markets.”
Strategic Obfuscation and Consumer Protection Policy (2014, background): “(disadvantageous) inequality aversion (Fehr and Schmidt, 1999; Armstrong and Huck, 2010).”