Financial markets have greater arbitrage opportunities than other markets, so behavioral factors might be thought to be less important here, but we show that even here the limits of arbitrage create anomalies that the psychology of decision making helps explain. We then illustrate how these concepts can be applied in two settings: finance and savings. Bounded self-interest incorporates the comforting fact that humans are often willing to sacrifice their own interests to help others. Bounded willpower captures the fact that people sometimes make choices that are not in their long-run interest. Bounded rationality reflects the limited cognitive abilities that constrain human problem solving. We then discuss three important ways in which humans deviate from the standard economic model. Because of limits of arbitrage less than perfect agents survive and influence market outcomes. Does some combination of market forces, learning and evolution render these human qualities irrelevant? No. We begin with a preliminary question about relevance. Transportation Economics in the 21st Centuryīehavioral Economics is the combination of psychology and economics that investigates what happens in markets in which some of the agents display human limitations and complications.Training Program in Aging and Health Economics.The Roybal Center for Behavior Change in Health.Retirement and Disability Research Center.Measuring the Clinical and Economic Outcomes Associated with Delivery Systems.Improving Health Outcomes for an Aging Population.Early Indicators of Later Work Levels, Disease and Death. ![]()
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