Preface xv

1 Rationality, Irrationality, and Rationalization 1

Part 1 Consumer Purchasing Decisions

2 Transaction Utility and Consumer Pricing 17

3 Mental Accounting 41

4 Status Quo Bias and Default Options 70

5 The Winner’s Curse and Auction Behavior 93

Part 2 Information and Uncertainty

6 Bracketing Decisions 125

7 Representativeness and Availability 156

8 Confirmation and Overconfidence 187

9 Decision under Risk and Uncertainty 214

10 Prospect Theory and Decision under Risk or Uncertainty 250

Part 3 Time Discounting and the Long and Short Run

11 Disagreeing with Ourselves: Projection and Hindsight Biases 281

12 Naïve Procrastination 309

13 Committing and Uncommitting 347

Part 4 Social Preferences

14 Selfishness and Altruism 389

15 Fairness and Psychological Games 417

16 Trust and Reciprocity 450

Glossary 473

Index 495

• Use of a wide range of examples: real-world examples, examples from experimental literature, and examples from laboratory exercise.
• Experiential examples put students in the position to experience the effect of behavioral economics themselves.
• Text is organized in a more user-friendly format—by behavioral principles—rather than by topic and diverse experiments with conflicting results, like many other textbooks.
• Text is flexible enough to appeal to a wide variety of audiences, and instructors can determine rigor, specifically when it comes to treatment of mathematical models.
• Significant discussion of management and policy implications, as well as the potential impacts of behavioral theory on welfare economics and policy.