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This book synthesizes recent developments in the theory of Industrial Organization, incorporating aspects of consumer psychology that are absent from the standard model of rational choice. The book analyzes three classes of market models in which profit-maximizing firms interact with boundedly rational consumers, each capturing a different aspect of bounded consumer rationality: dynamically inconsistent preferences and biased beliefs regarding future preferences, limited ability to understand price complexity, and reference-dependent choice. These models address questions such as: Can we explain observed pricing, marketing and product differentiation strategies as equilibrium responses consumers' bounded rationality? Do market forces protect boundedly rational consumers from being exploited by firms? What is the role of market regulation and consumer protection policies in this regard? How do firms discriminate between consumers according to differences in their rationality? The book is meant to serve as a textbook for graduate courses in microeconomic theory, industrial organization or behavioral economics.

Theories of economic growth focused on physical capital and its diffusion till the 1950s. Since then, increasing attention has been paid to the role and utility of knowledge, human capital, governance, institutions, and social capital as critical dimensions in determining economic growth and evolution. Focusing on the three forms of intangible capital—human, social, and institutional capital—this book looks at their dynamic linkages as crucial determinants of economic growth and their significance in the process of economic evolution. The book brings out this linkage at the macro level through case studies such as the growth experiences of Britain and America during the Industrial Revolution, Japan’s high growth post-WWII and its recent lackadaisical growth experiences, and the contemporary growth experiences of China and India. The book presents an analysis of the interaction between the three intangible capitals at the firm level to explain the micro phenomenon.

Normative analysis in economics has usually aimed at satisfying individuals’ preferences. Its conclusions have supported a long-standing liberal tradition of economics that values economic freedom and views markets favourably. However, behavioural research shows that individuals’ preferences, as revealed in choices, are often unstable, and vary according to contextual factors that seem irrelevant for welfare. The Community of Advantage proposes a reformulation of normative economics that is compatible with what is now known about the psychology of choice. Other such reformulations have assumed that people have well-defined ‘latent’ preferences which, because of psychologically-induced errors, are not always revealed in actual choices. According to these reformulations, the economist’s job is to reconstruct latent preferences and to design policies to satisfy them. The argument of this book is that latent preference and error are psychologically ungrounded concepts, and that economics needs to be more radical in giving up rationality assumptions. The book advocates a kind of normative economics that does not use the concept of preference. Its recommendations are addressed, not to an imagined ‘social planner’, but to citizens, viewed as potential parties to mutually beneficial agreements. Its normative criterion is the provision of opportunities for individuals to participate in voluntary transactions. Using this approach, many of the normative conclusions of the liberal tradition are reconstructed. It is argued that a well-functioning market economy is an institution that individuals have reason to value, whether or not their preferences satisfy conventional axioms of rationality, and that individuals’ motivations in such an economy can be cooperative rather than self-interested.

The world has become increasingly separated into the haves and have nots. This book shows how a contented class—not the privileged few but the socially and economically advantaged majority—defend their comfortable status at a cost. Middle-class voting against regulation and increased taxation that would remedy pressing social ills has created a culture of immediate gratification, leading to complacency and hampering long-term progress. Only economic disaster, military action, or the eruption of an angry underclass seem capable of changing the status quo. A groundbreaking critique, the book shows how the complacent majority captures the political process and determines economic policy.

In the past three decades, the number of obese adults in the United States has doubled and the number of obese children almost tripled, which may lead to increased medical expenditures, productivity loss, and stress on the health care system. Economic analysis now shows that weight gain is the result of individual choices in response to economic environments and demonstrates that incentives can influence individual behaviors affecting weight. Determinants are varied and include year- and area-specific food prices, availability of food outlets and recreational facilities, health insurance, and minimum wage levels. This book aims to provide foundation for evaluating the costs and benefits of various proposals designed to control obesity rates.

This is the first comprehensive book on the return of happiness in economics. It still sounds comparatively unusual to put happiness and economics together. At the same time, the association appears increasingly exciting and fruitful, and quite a number of studies have been produced following Richard Easterlin’s and Tibor Scitovsky’s pioneering works through the 1970s. The essays collected in this book provide an authoritative and comprehensive assessment - theoretical, applied, and partly experimental - of the entire field moving from the so-called paradoxes of happiness in economics. The book breaks new ground on the recent directions of research on happiness, well-being, interpersonal relations, and reciprocity. The meaning of happiness is thoroughly explored, and the tension between a hedonic-subjective idea of happiness and a eudaimonic-objective one is discussed.

At its core, an economy is about providing goods and services for human well-being. But many economists and critics preach that an economy is something far different: a cold and heartless system that operates outside of human control. This work asks a compelling question: If our economic world is something that we as humans create, aren't ethics and human relationships—dimensions of a full and rich life—intrinsically part of the picture? Is it possible to take this thing we call economics and give it a body and a soul? The book argues against the well-ingrained notion that economics is immune to moral values and distant from human relationships. Here, the book locates the impediment to envisioning a more considerate economic world in an assumption that is shared by both neoliberals and the political left. Despite their seemingly insurmountable differences, it notes that they both make use of the metaphor, first proposed by Adam Smith, that the economy is a machine. This pervasive idea, the book argues, has blinded us to the qualities that make us work and care for one another—qualities that also make businesses thrive and markets grow. We can wed our interest in money with our justifiable concerns about ethics and social well-being. And we can do so if we recognize that an economy is not a machine, but a living, beating heart that circulates blood to all parts of the body while also serving as an emblem of compassion and care.

Now that the U.S. Supreme Court has declared school voucher programs constitutional, the many unanswered questions concerning the potential effects of school choice will become especially pressing. Contributors to this volume draw on state-of-the-art economic methods to answer some of these questions, investigating the ways in which school choice affects a wide range of issues. Combining the results of empirical research with analyses of the basic economic forces underlying local education markets, this book presents evidence concerning the impact of school choice on student achievement, school productivity, teachers, and special education. It also tackles difficult questions such as whether school choice affects where people decide to live and how choice can be integrated into a system of school financing that gives children from different backgrounds equal access to resources. Contributors discuss the latest findings on Florida's school choice program as well as voucher programs and charter schools in several other states. The resulting volume not only reveals the promise of school choice, but examines its pitfalls as well, showing how programs can be designed that exploit the idea's potential but avoid its worst effects.

This book’s goal is to introduce evolutionary game theory to applied researchers in a manner accessible to graduate students and advanced undergraduates in biology, economics, engineering, and allied disciplines. Chapters 1 through 6 present the basic ideas and techniques of this field, including fitness, replicator dynamics, memes and genes, single- and multiple-population games, Nash equilibrium and evolutionarily stable states, noisy best response and other adaptive processes, the Price equation, cellular automata, and estimating payoff and choice parameters from the data. Chapters 7 through 14 collect exemplary applications from many fields, providing templates for applied work everywhere. These include a new co-evolutionary predator-prey learning model extending the rock-paper-scissors game; using human subject laboratory data to estimate models of learning in games; new approaches to plastic strategies and life cycle strategies, including estimates for male elephant seals; a comparison of machine-learning techniques for preserving diversity to those seen in the natural world; analyses of congestion in traffic networks (either Internet or highways)

This book is a clarion call to sports fans. It proposes a significant restructuring of sports leagues. The book sets out a rational program for a revolution that will serve the best interests of the fans and of the sport itself. But the book is not Marxist: it shows how a revolution in the organization of sports might even benefit the owners. By harnessing the power of markets, sports leagues can be made both more responsive to the needs of the fans, and more efficient. Many years were spent before this bok was written evaluating the ways in which leagues work across the globe. Drawing on an extensive study of leagues, the book boils down a plan to two major reforms. Borrowing from NASCAR, the book proposes that team owners should not own sports leagues as well. Rather, league ownership should be separate. The second proposal is drawn from soccer: introduce competition through a promotion and relegation system. In this type of system, the worst teams in the league are kicked out at the end of the season and replaced by the best-performing teams in the next division down. This gives poor performing teams incentive to step up their game, and allows fresh blood to enter the leagues if the poor performers fail to do so.

This book provides insights into behavioral phenomena common to production and service settings. The text provides ready-to-play games and other activities that allow instructors to demonstrate the phenomena in class and corporate training settings, and applicable prescriptions for practice. The text relates biases and heuristics leveraged by workers and managers to their motivations and the complex real-world dynamics of a variety of operations management and supply chain contexts. In doing so it works to elevate systems thinking perspectives and their effectiveness in these settings. In particular, game play and activities described in the contributed chapters are specifically targeted at strengthening the ability of managers to make sense of cause and effect in complex modern organizations.

This book confronts and debates the issues faced by the growing field of experimental economics. For example, as experimental work attempts to test theory, it raises questions about the proper relationship between theory and experiments. As experimental results are used to inform policy, the utility of these results outside the lab is questioned, and finally, as experimental economics tries to integrate ideas from other disciplines like psychology and neuroscience, the question of their proper place in the discipline of economics becomes less clear. The book is divided into four sections, each of which features a set of chapters and a set of comments on those chapters. The book offers a place where ideas about methodology could be discussed and even argued. Some of the chapters are contentious—a healthy sign of a dynamic discipline—while others lay out a vision for thought on how experimental economics should be pursued.

This book analyzes the relationship between income and subjective well-being, in particular in the increasingly relevant context of developing countries. A number of chapters in the book set out new evidence to explain why, despite the remarkable rate of economic growth that has been experienced in the country, the average level of happiness in China appears not to have risen. The various arguments raised in these chapters appeal to a number of matters such as increased insecurity, unemployment, adaptation to new higher living standards, and peer comparison. The collection also contains more mitigated points of view with regard to welfare in developing countries, taking as their basis the role of income growth in reducing the risk of low well-being, as well as more generally the inherent difficulties involved when studies attempt to use self-reported well-being measures as a metric of development.

This book deals with satisfaction analysis, that is, the way humans evaluate many aspects of their situation. It focuses on that which precedes decision taking (i.e., judgements and evaluations, likes and dislikes) on which preference orderings are based. Although written by two economists, the book covers many fields in the social sciences in the broadest sense, including psychology, sociology, and political science, with the aim of promoting discussion between the disciplines. It presents methodologies by which satisfaction can be analysed.

Honours fulfil one of the most fundamental desires of human beings, to be recognized and held in esteem by others. There are thousands of awards in all areas of society: the state (orders), arts and media, sports, religion, the voluntary sector, academia, and business. The book presents empirical evidence using modern statistical techniques to argue that awards affect the motivation of recipients. They can significantly raise performance in different contexts (e.g. in academia, the voluntary and for-profit sectors)—even if they are purely symbolic. Overall, honours are shown to be a useful intervention, above and beyond monetary incentives in the form of pay-for-performance or bonuses. The book makes the case for reorienting our focus—away from the monetary or material dimensions of work and private life, and towards the symbolic dimensions to celebrate and shine a light on merit and achievement. This is the first book on the Economics of Awards; it integrates insights from economics, psychology, management, and political science.

This book presents readers with an exercise in modeling human ways of being—thinking, feeling, acting. It does not merely introduce models, but also attempts to teach modeling, and to produce, within the reader, the predispositions and attitudes of the modeler: a distance from the individual whose behavior is modeled, an engineering approach to the model-building process, a (self)-critical approach to the model testing and elaboration process, and a pedagogical and a therapeutic approach to enacting and communicating models. The author makes the process and the phenomenon of modeling transparent and explicit, and clarifies the reasons for which modeling human behavior has to be an interactive process between the modeler and the modeled. This perspective situates the book at the intersection of analytical and computational thinking about rationality, reasoning, choice and thinking, and the tradition of action science and action research.

What is the best way to auction an asset? How should a group of people organize themselves to ensure the best provision of public goods? How should exchanges be organized? This book addresses these questions and more through an exploration of the economic theory of mechanism design. Mechanism design is reverse game theory. Whereas game theory takes the rules of the game as a given and makes predictions about the behavior of strategic players, the theory of mechanism design goes a step further and selects the optimal rules of the game. A relatively new economic theory, mechanism design studies the instrument itself as well as the results of the instrument. This book provides explanations of classic results in the theory of mechanism design, such as Myerson's theorem on expected revenue maximizing auctions, Myerson and Satterthwaite's theorem on the impossibility of ex post efficient bilateral trade with asymmetric information, and Gibbard and Satterthwaite's theorem on the non-existence of dominant strategy voting mechanisms. It also provides an examination of the frontiers of current research in the area.

Since the earliest days of philosophy, thinkers have debated the meaning of the term happiness and the nature of the good life. But it is only in recent years that the study of happiness—or “hedonics”—has developed into a formal field of inquiry, cutting across a broad range of disciplines and offering insights into a variety of crucial questions of law and public policy. This book brings together the best and most influential thinkers in the field to explore the question of what makes up happiness—and what factors can be demonstrated to increase or decrease it. The book offers an account of the way that hedonics can productively be applied to psychology. It also considers the unexpected relationship between happiness and health problems. It further views hedonics through the lens of cost–benefit analysis, another chapter considers the relationship between happiness and taxation, and the book also examines the role crime—and fear of crime—can play in people's assessment of their happiness, and much more.

Having broadly stabilized inflation over the past two decades, many policymakers in sub-Saharan Africa are now asking more of their monetary policy frameworks. They are looking to avoid policy misalignments and respond appropriately to both domestic and external shocks, including swings in fiscal policy and spikes in food and export prices. In many cases they are finding current regimes—often characterized as ‘money targeting’—lacking, with opaque and sometimes inconsistent objectives, inadequate transmission of policy to the economy, and difficulties in responding to supply shocks. At the same time, little existing research on monetary policy is targeted to low-income countries. What do we know about the empirics of monetary transmission in low-income countries? (How) Does monetary policy work in countries characterized by a huge share of food in consumption, underdeveloped financial markets, and opaque policy regimes? (How) Can we use methods largely derived in advanced countries to answer these questions? And (how) can we use the results to guide policymakers? This book draws on years of research and practice at the IMF and in central banks from the region to shed empirical and theoretical light on these questions and to provide practical tools and policy guidance. A key feature of the book is the application of dynamic general equilibrium models, suitably adapted to reflect key features of low-income countries, for the analysis of monetary policy in sub-Saharan African countries.