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A Introduction to Behavioral Economics: The Complicating But Sometimes Critical Considerations

52 Pages Posted: 30 Jan 2007 Last revised: 11 Nov 2007

Hugh H. Schwartz

University of the Republic, Uruguay

Date Written: January 30, 2007


This paper attempts to provide a substantive introduction to behavioral economics for a general audience, and for introductory and intermediate level students of economics and business administration. 1. Introduction; 2. The Background; 3. Bounded Rationality; 4. Prospect Theory and other major contributions from psychology; 5. Preferences; 6. Anomalies; 7. Heuristics, Context and Biases; 8. Intertemporal Decision Making; 9. Empirical Techniques; 10. Visceral Factors, Emotion, Affect and Social Psychology; 11. Neuroeconomics; 12. Relative Considerations, Social Preferences, Justice and Happiness; 13. Opportunity Costs; and 14.Applications. The latter touches on Saving, Behavioral finance, Marketing and organizational behavior, Labor economics, Cost-benefit analysis,Industrial Organization, Law and economics, Tax incentive alternatives, Monetary policy, Macroeconomic analysis generally, and Development economics. A select bibliography is offered, divided into introductory, intermediate level and more advanced level offerings.

Keywords: Bounded rationality, prospect theory, preferences, anomalies, heuristics, context and biases, intertemporal decision making, empirical techniques, emotion and social psychology, neuroeconomics, relative considerations, social preferences, justice and happiness, opportunity costs, applications

JEL Classification: A10, B40, D20, D80, G10

Suggested Citation

Schwartz, Hugh H., A Introduction to Behavioral Economics: The Complicating But Sometimes Critical Considerations (January 30, 2007). Available at SSRN: or

Hugh H. Schwartz (Contact Author)

University of the Republic, Uruguay ( email )

Montevideo, 11300

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