Download or read book Are Markets with Loss Averse Consumers More Sensitive to Losses written by Zhenyu Hu and published by . This book was released on 2016 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral pricing and revenue management aims to incorporate realistic consumer behavior into firms' pricing and inventory models. The key input to these models is market demand, which is often assumed to inherit the characteristics of consumer behavior -- as when, for example, one assumes that a market consisting of loss-averse consumers is more responsive to losses than to gains. Yet market demand and consumer behavior need not be related and so, we argue, that approach to modeling market demand is misguided. This paper proposes an approach that accounts for the heterogeneity in consumer valuation: we aggregate the demand of individual loss-averse consumers to obtain market demand and show that market demand may be more responsive to gains, to losses or be equally responsive. Our results have profound implications not only for how best to characterize the market demand of behaviorally biased consumers but also for determining the firm's optimal pricing policy.
Download or read book Choices Values and Frames written by Daniel Kahneman and published by Cambridge University Press. This book was released on 2000-09-25 with total page 864 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making.
Download or read book Moderating Loss Aversion written by Kellen Mrkva and published by . This book was released on 2020 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Loss aversion, the principle that losses impact decision making more than equivalent gains, is a fundamental idea in consumer behavior and decision making, though its existence has recently been called into question. Across five unique samples (Ntotal = 17,720), we tested predictions about what moderates loss aversion, which were derived from a preference construction account. Across studies, more domain knowledge, experience, and education were associated with lower loss aversion, though people of all knowledge, experience, and education levels were loss averse. Among car buyers, those who knew more about a particular car attribute (e.g., fuel economy) were less loss averse for that attribute but not other attributes (e.g., comfort), consistent with the idea that people with less attribute knowledge are more likely to construct preferences, thereby increasing loss aversion. Additionally, older consumers were more loss averse across different loss aversion measures and studies. We discuss implications for several accounts of loss aversion, including alternative accounts rooted in status quo bias, emotion, or feelings of ownership. In addition to discovering key loss aversion moderators, we cast doubt on recent claims that loss aversion is a fallacy or is fully explained by status quo bias, risk aversion, or the educated laboratory samples often used to study loss aversion.
Download or read book Loss Aversion in Financial Markets written by Liyan Yang and published by . This book was released on 2020 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Experimental evidence suggests that people are more sensitive to losses than gains by a factor of about two. Researchers have drawn implications from loss aversion to understand various aspects of individual decisions and asset prices in financial markets. At the current stage, some ancillary assumptions have been made in deriving these implications. Loss aversion affects financial markets through affecting the risk attitudes of market participants. Taken as a whole, loss aversion is a useful ingredient in helping us understand financial markets.
Download or read book Prospect Theory written by Peter P. Wakker and published by Cambridge University Press. This book was released on 2010-07-22 with total page 519 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prospect Theory: For Risk and Ambiguity, provides a comprehensive and accessible textbook treatment of the way decisions are made both when we have the statistical probabilities associated with uncertain future events (risk) and when we lack them (ambiguity). The book presents models, primarily prospect theory, that are both tractable and psychologically realistic. A method of presentation is chosen that makes the empirical meaning of each theoretical model completely transparent. Prospect theory has many applications in a wide variety of disciplines. The material in the book has been carefully organized to allow readers to select pathways through the book relevant to their own interests. With numerous exercises and worked examples, the book is ideally suited to the needs of students taking courses in decision theory in economics, mathematics, finance, psychology, management science, health, computer science, Bayesian statistics, and engineering.
Download or read book Handbook of Behavioral Industrial Organization written by Victor J. Tremblay and published by Edward Elgar Publishing. This book was released on 2018 with total page 483 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of Behavioral Industrial Organization integrates behavioral economics into industrial organization. Chapters cover concepts such as relative thinking, salience, shrouded attributes, cognitive dissonance, motivated reasoning, confirmation bias, overconfidence, status quo bias, social cooperation and identity. Additional chapters consider industry issues, such as sports and gambling industries, neuroeconomic studies of brands and advertising, and behavioral antitrust law. The Handbook features a wide array of methods (literature surveys, experimental and econometric research, and theoretical modelling), facilitating accessibility to a wide audience.
Download or read book The Bright Side of Loss Aversion in Dynamic and Competitive Markets written by Kangkang Wang and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A well-established phenomenon of consumer buying behavior is that consumers evaluate prices relative to a reference point and exhibit loss aversion; i.e., their propensity to buy is more negatively affected by prices above the reference point than it is positively affected by prices below the reference point. The objective of this paper is to analytically examine how the competitive strategy and profitability of firms are affected by the presence of consumer loss aversion in the price dimension. Although we assume that consumer loss aversion increases consumer propensity to search for lower prices, we find that it does not necessarily lead to lower prices or profits when firms compete over multiple periods and when the consumer reference price in subsequent periods is affected by current prices. Specifically, consumer loss aversion could lead to higher prices and profits when consumer valuation is sufficiently high relative to search costs and the proportion of consumers with positive search costs is in an intermediate range. We also show that when forward-looking firms incorporate the negative effect of price promotions on future profits, the equilibrium range of price promotions may actually increase.
Download or read book Investor Behavior written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2014-02-10 with total page 645 pages. Available in PDF, EPUB and Kindle. Book excerpt: WINNER, Business: Personal Finance/Investing, 2015 USA Best Book Awards FINALIST, Business: Reference, 2015 USA Best Book Awards Investor Behavior provides readers with a comprehensive understanding and the latest research in the area of behavioral finance and investor decision making. Blending contributions from noted academics and experienced practitioners, this 30-chapter book will provide investment professionals with insights on how to understand and manage client behavior; a framework for interpreting financial market activity; and an in-depth understanding of this important new field of investment research. The book should also be of interest to academics, investors, and students. The book will cover the major principles of investor psychology, including heuristics, bounded rationality, regret theory, mental accounting, framing, prospect theory, and loss aversion. Specific sections of the book will delve into the role of personality traits, financial therapy, retirement planning, financial coaching, and emotions in investment decisions. Other topics covered include risk perception and tolerance, asset allocation decisions under inertia and inattention bias; evidenced based financial planning, motivation and satisfaction, behavioral investment management, and neurofinance. Contributions will delve into the behavioral underpinnings of various trading and investment topics including trader psychology, stock momentum, earnings surprises, and anomalies. The final chapters of the book examine new research on socially responsible investing, mutual funds, and real estate investing from a behavioral perspective. Empirical evidence and current literature about each type of investment issue are featured. Cited research studies are presented in a straightforward manner focusing on the comprehension of study findings, rather than on the details of mathematical frameworks.
Download or read book Neuroeconomics written by Paul W. Glimcher and published by Academic Press. This book was released on 2013-08-13 with total page 606 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the years since it first published, Neuroeconomics: Decision Making and the Brain has become the standard reference and textbook in the burgeoning field of neuroeconomics. The second edition, a nearly complete revision of this landmark book, will set a new standard. This new edition features five sections designed to serve as both classroom-friendly introductions to each of the major subareas in neuroeconomics, and as advanced synopses of all that has been accomplished in the last two decades in this rapidly expanding academic discipline. The first of these sections provides useful introductions to the disciplines of microeconomics, the psychology of judgment and decision, computational neuroscience, and anthropology for scholars and students seeking interdisciplinary breadth. The second section provides an overview of how human and animal preferences are represented in the mammalian nervous systems. Chapters on risk, time preferences, social preferences, emotion, pharmacology, and common neural currencies—each written by leading experts—lay out the foundations of neuroeconomic thought. The third section contains both overview and in-depth chapters on the fundamentals of reinforcement learning, value learning, and value representation. The fourth section, "The Neural Mechanisms for Choice, integrates what is known about the decision-making architecture into state-of-the-art models of how we make choices. The final section embeds these mechanisms in a larger social context, showing how these mechanisms function during social decision-making in both humans and animals. The book provides a historically rich exposition in each of its chapters and emphasizes both the accomplishments and the controversies in the field. A clear explanatory style and a single expository voice characterize all chapters, making core issues in economics, psychology, and neuroscience accessible to scholars from all disciplines. The volume is essential reading for anyone interested in neuroeconomics in particular or decision making in general. - Editors and contributing authors are among the acknowledged experts and founders in the field, making this the authoritative reference for neuroeconomics - Suitable as an advanced undergraduate or graduate textbook as well as a thorough reference for active researchers - Introductory chapters on economics, psychology, neuroscience, and anthropology provide students and scholars from any discipline with the keys to understanding this interdisciplinary field - Detailed chapters on subjects that include reinforcement learning, risk, inter-temporal choice, drift-diffusion models, game theory, and prospect theory make this an invaluable reference - Published in association with the Society for Neuroeconomics—www.neuroeconomics.org - Full-color presentation throughout with numerous carefully selected illustrations to highlight key concepts
Download or read book Misbehaving The Making of Behavioral Economics written by Richard H. Thaler and published by W. W. Norton & Company. This book was released on 2015-05-11 with total page 502 pages. Available in PDF, EPUB and Kindle. Book excerpt: Winner of the Nobel Prize in Economics Get ready to change the way you think about economics. Nobel laureate Richard H. Thaler has spent his career studying the radical notion that the central agents in the economy are humans—predictable, error-prone individuals. Misbehaving is his arresting, frequently hilarious account of the struggle to bring an academic discipline back down to earth—and change the way we think about economics, ourselves, and our world. Traditional economics assumes rational actors. Early in his research, Thaler realized these Spock-like automatons were nothing like real people. Whether buying a clock radio, selling basketball tickets, or applying for a mortgage, we all succumb to biases and make decisions that deviate from the standards of rationality assumed by economists. In other words, we misbehave. More importantly, our misbehavior has serious consequences. Dismissed at first by economists as an amusing sideshow, the study of human miscalculations and their effects on markets now drives efforts to make better decisions in our lives, our businesses, and our governments. Coupling recent discoveries in human psychology with a practical understanding of incentives and market behavior, Thaler enlightens readers about how to make smarter decisions in an increasingly mystifying world. He reveals how behavioral economic analysis opens up new ways to look at everything from household finance to assigning faculty offices in a new building, to TV game shows, the NFL draft, and businesses like Uber. Laced with antic stories of Thaler’s spirited battles with the bastions of traditional economic thinking, Misbehaving is a singular look into profound human foibles. When economics meets psychology, the implications for individuals, managers, and policy makers are both profound and entertaining. Shortlisted for the Financial Times & McKinsey Business Book of the Year Award
Download or read book Prospect Theory written by Daniel Kahneman and published by . This book was released on 1979 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Revenue Management and Pricing Analytics written by Guillermo Gallego and published by Springer. This book was released on 2019-08-14 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: “There is no strategic investment that has a higher return than investing in good pricing, and the text by Gallego and Topaloghu provides the best technical treatment of pricing strategy and tactics available.” Preston McAfee, the J. Stanley Johnson Professor, California Institute of Technology and Chief Economist and Corp VP, Microsoft. “The book by Gallego and Topaloglu provides a fresh, up-to-date and in depth treatment of revenue management and pricing. It fills an important gap as it covers not only traditional revenue management topics also new and important topics such as revenue management under customer choice as well as pricing under competition and online learning. The book can be used for different audiences that range from advanced undergraduate students to masters and PhD students. It provides an in-depth treatment covering recent state of the art topics in an interesting and innovative way. I highly recommend it." Professor Georgia Perakis, the William F. Pounds Professor of Operations Research and Operations Management at the Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts. “This book is an important and timely addition to the pricing analytics literature by two authors who have made major contributions to the field. It covers traditional revenue management as well as assortment optimization and dynamic pricing. The comprehensive treatment of choice models in each application is particularly welcome. It is mathematically rigorous but accessible to students at the advanced undergraduate or graduate levels with a rich set of exercises at the end of each chapter. This book is highly recommended for Masters or PhD level courses on the topic and is a necessity for researchers with an interest in the field.” Robert L. Phillips, Director of Pricing Research at Amazon “At last, a serious and comprehensive treatment of modern revenue management and assortment optimization integrated with choice modeling. In this book, Gallego and Topaloglu provide the underlying model derivations together with a wide range of applications and examples; all of these facets will better equip students for handling real-world problems. For mathematically inclined researchers and practitioners, it will doubtless prove to be thought-provoking and an invaluable reference.” Richard Ratliff, Research Scientist at Sabre “This book, written by two of the leading researchers in the area, brings together in one place most of the recent research on revenue management and pricing analytics. New industries (ride sharing, cloud computing, restaurants) and new developments in the airline and hotel industries make this book very timely and relevant, and will serve as a critical reference for researchers.” Professor Kalyan Talluri, the Munjal Chair in Global Business and Operations, Imperial College, London, UK.
Download or read book Law Psychology and Morality written by Eyal Zamir and published by Oxford University Press, USA. This book was released on 2015 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prospect theory posits that people do not perceive outcomes as final states of wealth or welfare, but rather as gains or losses in relation to some reference point. People are generally loss averse: the disutility generated by a loss is greater than the utility produced by a commensurate gain. Loss aversion is related to such phenomena as the status quo and omission biases, the endowment effect, and escalation of commitment. The book systematically analyzes the relationships between loss aversion and the law.
Download or read book Consumer Theories of Harm written by Paolo Siciliani and published by Bloomsbury Publishing. This book was released on 2019-09-19 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt: It has long been thought that fairness in European Consumer Law would be achieved by relying on information as a remedy and expecting the average consumer to keep businesses in check by voting with their feet. This monograph argues that the way consumer law operates today promises a lot but does not deliver enough. It struggles to avoid harm being caused to consumers and it struggles to repair the harm after the event. To achieve fairness, solutions need to be found elsewhere. Consumer Theories of Harm offers an alternative model to assess where and how consumer detriment may occur and solutions to prevent it. It shows that a more confident use of economic theory will allow practitioners to demonstrate how a poor standard of professional diligence lies at the heart of consumer harm. The book provides both theoretical and practical examples of how to combine existing law with economic theory to improve case outcomes. The book shows how public enforcers can move beyond the dominant transparency paradigm to an approach where firms have a positive duty to treat consumers fairly and shape their commercial offers in a way that prevents consumers from making mistakes. Over time, this 'fairness-by-design' approach will emerge as the only acceptable way to compete.
Download or read book Research Handbook on Inventory Management written by Jing-Sheng J. Song and published by Edward Elgar Publishing. This book was released on 2023-08-14 with total page 565 pages. Available in PDF, EPUB and Kindle. Book excerpt: This comprehensive Handbook provides an overview of state-of-the-art research on quantitative models for inventory management. Despite over half a century’s progress, inventory management remains a challenge, as evidenced by the recent Covid-19 pandemic. With an expanse of world-renowned inventory scholars from major international research universities, this Handbook explores key areas including mathematical modelling, the interplay of inventory decisions and other business decisions and the unique challenges posed to multiple industries.
Download or read book Operational and Economical Perspectives on Consumer Returns written by Gülay Samatli-Pac̦ and published by . This book was released on 2013 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Customer return policies are one of common after sale services offered by a retailer in order to boost sales, improve customer satisfaction and diminish customer fit uncertainty. With such a service, the retailer accepts the return of a product after the sale has occurred, if it does not satisfy the customer's expectations. This study investigates consumer returns from three different perspectives. First, we start with a single period inventory planning problem of multi-variants in which customers have a right to return products in case of dissatisfaction. We assume that returns can be as-good-as-new condition after a minor restocking process and they are resalable in the same selling period. At the time of purchasing, a customer may choose to substitute her choice with another variant of the item, if the former is sold out. This, so called substitution, and resalable returns are important parameters in assortment planning that might affect the total profit dramatically. Under this setting, we aim to illustrate the effect of return and substitution on the optimal order quantities of variants and the total expected profit. We show that the total profit decreases as the probability of returns or the probability of resalable returns increases. In addition, the probability of substitution, return, or resalable return has a negative effect on inventory level of variants. Second, we analyze a retailer's return policy problem when the market consists of loss-averse customers who are more sensitive to losses than gains instead of being risk-neutral customers. We examine the situation in which a seller makes price and quantity decisions for a single item and also designs an appropriate returns policy in order to maximize his profit. We analyze the case where the seller offers either a full-refund or a partial-refund policy if he decides to accept returns or chooses not to accept any returns. With the full-refund policy, the seller reimburses the consumer the full price of the product if it does not fit the customer's preferences. With a partial-refund policy, the seller offers a refund which is strictly less than the purchase price. We assume that customers are strategic customers aiming to maximize their utilities of the product. With this model, we aim to analyze the impact of loss aversion on the seller's price and order quantity decisions. We show that the seller keeps fewer inventories as customers get more loss-averse and loss-aversion has a negative effect on the expected unit profit. Thus, the total profit decreases as loss-aversion. Finally, we present a model that investigates the effects of return policies on each of the two sellers' pricing decisions when these sellers engage in market size competition. Our model simultaneously addresses a consumer's purchase decision and the competing sellers' price decisions, along with their respective return policies. We assume that two competing sellers which do not have a capacity problem only decide their prices and return policies. The sellers may independently offer no-refund, full-refund of the price of the product, or a partial-refund. The market share of each party depends on his and the rival's price and return policy; customer valuations of the product and the degree of competition between the sellers. Before purchasing, a consumer cannot evaluate the product's utility which is a decreasing function of the price set by the seller from which she chooses to purchase it and the disutility of purchase and/or return which is related to the physical distance between the consumer and the seller's location. The return policy of a seller may also affect a consumer's decision via her expected utility. Thus, pricing and return policy decisions play an important role in the division of the total market. We show that the full-refund policy yields a higher purchasing price compare to the no-refund or partial-refund policy. However, it only performs better in terms of profit when the product has a small salvage value and a partial-refund policy is not an option for the retailer. When the retailer offers the partial-refund policy, it always dominates the other refund policies. In addition, we show that the full-refund policy provides the highest consumer surplus since customers do not face any risk of misfit. On the other hand, the full-refund policy is socially efficient only when the salvage value is high. For low salvage values, the partial-refund policy yields a higher level of social welfare.
Download or read book Insurance and Behavioral Economics written by Howard C. Kunreuther and published by Cambridge University Press. This book was released on 2013-01-28 with total page 343 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines the behavior of individuals at risk and insurance industry policy makers involved in selling, buying and regulation.
