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Behavioral Economics as Applied to Firms: A Primer

BY | January 7, 2011

Mark Armstrong, Steffen Huck, Jan 07, 2011 We discuss the literatures on behavioral economics, bounded rationality, and experimental economics as they apply to firm behavior in markets. Topics discussed include…

Mark Armstrong, Steffen Huck, Jan 07, 2011

We discuss the literatures on behavioral economics, bounded rationality, and experimental economics as they apply to firm behavior in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers, the benefits of employing managers whose objective diverges from profit-maximization (including managers who are overconfident or base pricing decisions on sunk

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