Tag: Behavioral Economics

Limitations of Mainstream Consumer Theory in Economics

Recent evidence in behavioral finance and consumer psychology points to the fact that consumer information processing capabilities are limited and prone to error. Alias paradox and Ellsberg paradox are good examples of this phenomenon. Furthermore, ‘Ultimatum Game’ reflects the fact that people tend to look at their choice outcomes relatively. Prisoner’s Dilemma highlights the fact that choices by each player in a self-centric way are not necessarily going to be best for them either individually or collectively.

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