ECON 04102 Lecture Notes - Lecture 8: Marginal Utility, Behavioral Economics, Mental Accounting
29 Sep 2016
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Document Summary
People have stable preferences that aren"t a ected by context. People are good planners who possess plenty of willpower. Focuses on the mental process behind decisions vs. neoclassical focus on predicting behavior. Improves outcomes by improving decision-making vs. neoclassical focus on providing people more decision options. Viewing behavioral economics and neoclassical economics as complements to each other. How people actually with life"s ups and downs. People judge things relative to their own status quo: di erent for everybody. Consumers see any price increase as a loss relative to the status quo. Knowing that, producers prefer to reduce package size instead of raising prices. Total price, rather than price per unit, matters most to consumers. Consumers evaluate events in a particular mental frame. New information alters the frame in which the consumer de nes whether situations are gains or losses. Sellers want buyers to see new or changed info as gains.
