Adverse selection, 38
Allais paradox, 78, 79, 80, 10-12, 104, 105, 106
Altruism, 30-32, 34, 36, 37, 43, 70, 74
American Airlines flight 11, 129
Anchoring effect, 81
Approximate optimization. See Approximate Nash equilibrium
Bank regulation, 37
Becker-DeGroot-Marschak elicitation procedure, 81, 122
Behavioral economics, ix, 2-3, 5, 7, 66, 77-80, 86, 90-91, 93, 95, 98, 99, 105, 107, 112, 114, 123, 124, 127-130
Beliefs, 6-7, 24, 26, 64, 68, 111-116
incorrect, 78, 83-85, 112, 113, 114
superstitious, 116
Best response, 29, 53, 67-68, 74
Biblical game, 33
polite, 34
Code of Hammurabi, 115-116, 118
Coefficient of relative risk aversion, 103-104, 106, 119
Common knowledge, 111, 119, 122
Competitive equilibrium, 15, 17, 18, 19, 82
Competitive market clearing equilibrium, 17
Competitive markets, 6, 14-17, 58
Consumption lock-in model, 110
Continuity axiom, 101
Cooperation. See Altruism
Coordination failure equilibrium, 44, 45
Decision node, 48
Deep Blue, 49
Diamond-Dybvig model, 40
Dominant strategy equilibrium, 24, 33, 34, 35
Drug use, 87
Dynamic programming. See Backward induction
Economic crises, 3, 83, 85, 96, 115
Efficiency wages, 83
Efficient-market hypothesis, 75
Endowment effect, 80
Epsilon equilibrium. See Nash equilibrium
Equity premium puzzle, 108, 109, 110
Evolutionary biology, 90
Excess volatility puzzle, 108
Expected utility theory, 80, 100, 102, 104, 106, 107
Exponential growth, 11
Extensive form game, 56
Fallacy of composition, 22-25, 33, 127
Game thoery, ii, 5-7, 14, 15, 24, 32-33, 38, 48, 50
behaviouraleconomics.indd 139
evolutionary game theory, ii
See also Mechanism design theory
Great Depression, 45
Habit formation, 64, 79, 109, 110, 127
Hail Mary pass, 107
Harrod-Domar model, 45
Health club memberships, 95, 99
Herding model, 86
Homo economicus, 1, 2, 5, 63, 94
Imagination, 91
Impulsive behavior, 97
Independence axiom. See Independence of irrelevant alternatives axiom
Independence of irrelevant alternatives axiom, 101-102
Iterated dominance, 35
Kandori-Mailath-Rob model, 44
Laboratory experiment, 7, 30-31
active, 113
passive, 113
Learning theory, 59, 61, 63, 72, 77, 79, 99, 112-13, 118, 119, 122
Logistic choice model, 68
Matching-pennies game, 69-70, 71, 72
Matrix of payoffs, 23
Mechanism design theory, 15
Nash equilibrium, 6-7, 8, 9, 10, 12-15, 17, 18, 24-25, 28, 29, 30-31, 34, 35, 44, 47, 49-50, 59, 60, 63, 67, 68-69, 73, 74, 77, 110, 117, 118-119, 120
and learning, 7
and randomization, 71
strict, 57
Negative externality, 25
Non-cooperative equilibrium. See Nash equilibrium Non-cooperative game, 5
Overconfidence, 84
Panic, 125
financial, 39
market, 39
Pareto efficiency, 34
Payoffs. See Utility
Perfect foresight equilibrium. See Competitive market clearing equilibrium
Pivotal-voter game, 7, 9-10, 66
Political game, 26
Precommitment, 50
Present discounted value. See Present value
Price stickiness, 84
Prisoner’s dilemma, 33-35, 39, 43, 51
Prisoner’s dilemma and fallacy of composition, 22-25
Probability distortion, 104
Probability matching, 124
Procrastination, 78, 91, 97-99
Prospect theory, 78, 79, 80, 102, 104-107, 109
Quantal response equilibrium, 68-69, 71-72, 74, 76
Quasi-hyperbolic discounting. See Discounting
Rabin paradox, 78, 80, 102-104, 106, 108, 110
Rational expectations equilibrium. See Competitive market clearing equilibrium
Rational expectations model, 2, 40, 41, 54
Recursive analysis. See Backward induction
Reduction of compound lotteries axiom, 100-101
Reference point, 104, 106-107, 109
Reinforcement learning, 124
and definite ending, 28
and indefinite ending, 28
Risk aversion, 102-104, 106, 108, 109
Risk premium, 103
Rush hour traffic game, 12-13, 26
Satisficing behavior, 64
Schelling game. See Coordination game Self-commitment, 94-95
Self-confirming equilibrium, 113-119
and economic crises, 115
and economic policy, 114
and social norms, 117
Self-control, ii, 2, 96-97, 110
Self-fulfilling prophecies, 41, 116n.
fairness, 32
reciprocal altruism, 32
spite, 59
Strategies, 28, 34, 35, 49-50, 56, 69, 70, 74, 110
Subgame, 47-61, 67, 112, 114, 117
Subgame confirmed equilibrium, 117
Subgame perfect equilibrium, 47, 49, 56, 58, 61, 67, 113
and robustness, 55
Systematic bias, 85
above average, 84
emotions, 85
limited attention, 85
prior information, 85
social pressure, 86
understimate adaptation, 85
Turing machine. See Universal Turing Machine
Ultimatum bargaining game, 57, 66, 113
Unbounded rationality, 1, 18, 19
United Airlines flight 93, 129
Universal Turing Machine, 126
Utility, 22, 23-25, 33, 36, 39, 69-70, 79, 88, 89, 101, 102, 105, 109
Von-Neumann Morgenstern utility function, 101
Voting theory, 7
Willingness to accept, 59, 80, 81-82
Willingness to pay, 17, 81, 86
Winner’s curse, 69
Zero sum game, 70