Psychology and the market

Description

"Prospect theory, loss aversion, mental accounts, hyperbolic discounting, cues, and the endowment effect can all be seen as examples of situationalism -- the view that people isolate decisions and overweight immediate aspects of the situation relative to longer term concerns. But outside of the laboratory, emotionally-powerful situational factors -- frames, social influence, mental accounts -- are almost always endogenous and often the result of self-interested entrepreneurs. As such, laboratory work and, indeed, psychology more generally, gives us little guidance as to market outcomes. Economics provides a stronger basis for understanding the supply of emotionally-relevant situational variables. Paradoxically situationalism actually increases the relative importance of economics"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series -- no. 10203.
• Working paper series (National Bureau of Economic Research) -- working paper no. 10203.

Links

• URL

Other Editions

• Psychology and the marketNational Bureau of Economic Research2003-01-01
• Psychology and the marketElectronic resourceNational Bureau of Economic Research2004-01-01