Behavioural Economics and Finance

Behavioural Economics and Finance

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Standard models in economic and finance usually assume that people are rational, self-interested maximisers, effectively co-ordinated via the invisible hand of the price mechanism. Whilst these approaches produce tractable, simple models they cannot fully capture the uncertainties and instabilities that affect everyday choices in todaya€™s complex world. Insights from the other social and behavioural sciences can help to fill the gap and behavioural economics is the subject which brings economics and finance together with psychology, neuroscience and sociology. Behavioural Economics and Finance introduces the reader to some of the key concepts and insights from this rich, inter-disciplinary approach to real-world decision-making.In comparison with the exponentials, hyperbolics have higher discount factors in the very long run and, if rational, will use a crude commitment technology to prevent splurging behaviour. This explains why they invest in illiquid assets whilst simultaneously running up credit card debt. ... is consistent with different discount fimctions in the short run versus the long run, implying a high short-run discount rateanbsp;...

Title:Behavioural Economics and Finance
Author:Michelle Baddeley
Publisher:Routledge - 2013-04-26


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