INDEX

A

Absolute magnitude effect, 331–336 Absolute risk aversion, 131 Accounts, 62–64

Acquisition utility, 25, 55 Addiction, 146–149

projection bias and, 290–292 Additive model, 284 Adjusting

mechanism, 73

winner’s curse and, 110–117 Ainslie, G. W., 318–319, 343 Akerlof, G., 378

Ali, M. M., 264

Allais, P. M., 230–231, 233, 246–247 Allais’ paradox, 231

Alpert, M., 200–201

Altruism, 389–416 impure altruism, 411

public goods provision and altruistic behavior, 409–413

rationality and, 392–397 Ambiguity, 215

ambiguity aversion, 241–246 Anchoring

mechanism, 73

winner’s curse and, 110–117 Anderson, D. C., 181 Andreoni, J., 395–397, 400–401 Anomaly, behavioral, 1

Ariely, D., 72, 74, 98, 307, 360 Arkes, H. R., 23–24, 57, 65 Asymmetric elasticity condition, 337

Auctions/Auction behavior, 93–121, See also Bidding; Rational bidding in auctions; Winner’s curse

common-value auction, 106 uncertainty in, 106–107

Availability, 156–186

B

Babcock, L., 209 Backward induction, 350 Banaji, M. R., 462 Baraji, P., 100

Baratta, P., 237 Barber, B. M., 205 Barberis, N., 138 Barney, J. B., 202, 204 Base rate neglect, 165 Base rate, 165–166

‘Battle of the Sexes’ game, 429 Bayes’ rule, 160, 172

Bayesian Nash equilibrium, 119–121 Bazerman, M. H., 114–115

Becker, G., 293

Behavioral bracketing, 149–150 rational explanations for, 151

Behavioral model, 9 advantages, 9 downfall of, 9

Benartzi, S., 135–136, 360

Benzion, U., 326, 331, 333 Berg, J., 451

Bernoulli, D., 216

Bertrand, M., 182 $-Bet, 219

Betweenness axiom, 234–235

Bias, 167–169, 181–183, 207–208, See also Confirmation: bias; Self-serving bias

conjunction bias, 167–169

Bickel, W. K., 335

Bidding, 93–121, See also Auctions/Auction behavior; Rational bidding in auctions

heuristics and transparency, 99–100 incremental bidding behavior, 98 uncertainty in, 119–121

Bigotry, 181–183

Binomial probability function, 157 Birnbaum, M., 220

Bliss point, 20 Blume, L. E., 13 Blumer, C., 23–24, 57 Bogan, V., 197

Bounded rationality, 8–10 modeling, 8–10

behavioral model, 9 procedural rational model, 9

Bracketing, 125–155

addiction and melioration, 146–149 adding up, 145–146

behavioral bracketing, 149–150 rational explanations for, 151 changing preferences, 145–146

choice bracketing, 145–146 history, 150

narrow bracketing and motivation, 149 narrow versus broad bracketing, 135–139 portfolio problem, 139, 154–155

risk aversion, 140–143 utility function, 140–143 and variety, 144

rational bracketing for, 144 Broad bracketing, 135–139 Brockhaus, R. H., 202 Budgets, 46, 62–64

budgeting bundles, 49–52 nonoptimality between, 50

Burnham, T. C., 405 Busenitz, L. W., 202, 204

C

Calibration exercises, 162–164

Camerer, C. F., 148, 202, 204, 211, 236, 304 Campbell, W. M., 109, 116

Cancellation, 257–258 Capen, E. C., 100

Carter, M. R., 413, 458–459 Cassing, J., 110

Castillo, M., 413, 458–459

Causal relationship establishment, experiments in, 12 Centipede game, See Take-It-or-Leave-It game Certainty, 231

certainty effects, 231–234, 238, 259 certainty equivalent, 128

in multiple rational choice, 126–133 Chambers, V., 52

Chan, K. S., 411 Cheap talk, 455 Chen, K., 82

Choice bracketing, See Bracketing Clapp, R. V., 100

Closing accounts, 57–60 Coding, 257

Coefficient of ambiguity aversion, 244 Cold state, 297

Combination, 257

Committing/Commitment mechanisms, 347–385 choosing when to do it, 361–368

independence of irrelevant alternatives, 362 possibility of, 348–351

rationality of, 348–351

recursive optimization problem, 348 under time inconsistency, 351–360

Common difference effect, 330–331 Common outcome effect, 231 Common-value auction, 106 Competitive marketplace

holding firms accountable in, 425–427 demand shifts, 426

quality differences, 426 Complete preference, 3 Completeness, 392 Compound gamble, 132, 226 Compte, O., 209

Concavity, risk aversion and, 254 Concorde paradox, See Sunk cost fallacy Conditional probability function, 161 Confidence interval, 158

Confirmation, 187–213 bias, 192–203

conditions leading to, 193

Rabin and Schrag’s model of, 196

Confirmatory information, 192 Confirming forecast, 190 Conjunction bias, 167–169 Conlin, M., 296

Conservatism versus representativeness, 178–179 Constant additive loss aversion, 81

Constant loss aversion, 80

indifference curves shape with, 91–92 Constant sensitivity, 80

Consumer preferences in reference, transaction utility and, 34–35

Consumer pricing, 17–40 Consumer problem, 77–81 Consumption bundles, 49–52 Consumption smoothing, 317

Contextdependent preferences, rational explanations for, 36–37

Continuity axiom, 217, 249

Continuous choice problem with backward induction, 381–385

Continuous time, discounting in, 312–313 Contrapositive statements, 191 Convexity, risk loving and, 254 Cost–benefit analysis, 17

Cox, J. C., 104

Credit card purchases, 55–57 Croson, R., 177

Cross, M. L., 181 Crowding-out effect, 411 Cruelty, 428

Cumulative prospect theory, 259

in Marschak–Machina triangle, 263 probability weighting under, 262 value function under, 261

Curse of knowledge, hindsight bias and, 303–306

χ-Cursed equilibrium, 112

D

Dahl, G. B., 208

Darley, J. M., 190

Debreu, G., 389 DeBruine, L. M., 463

Decision making for our future self, 287–290 Decision under risk and uncertainty, 214–249 Decision under risk or uncertainty, 250–277

Default options, 70–92

preference formation, framing, and, 72–76 Delay–speedup asymmetry, 341

Della Vigna, S., 30, 369 Demand curves, 13

rationality and, 4–8 Dependent option, 224 Detection of dominance, 258 Dickhaut, J., 451

Dictator game, 394–397 inequity-averse preferences in, 421

Diminishing sensitivity, 78–79 Dino, R. N., 391

Directly revealed preference, 397 Disconfirmatory information, 192 Discount factor, 311 Discounting

in continuous time, 312–313

with prospect-theory value function, 336–343 stability, question of, 313–318

Disposition effect, 58 Distrust, 465–466 Diversification bias, 144 Dodonova, A., 35 Doherty, M. E., 192 Dominant strategy, 94

Double-entry accounting system, 45–46 Douglas, R. W., 110

Dual entitlement, 425 Dutch auctions, 101–106 Dyer, D., 115

E

Easterlin, R. A., 407

Editing component of prospect theory, 257 cancellation, 257–258

coding, 257 combination, 257

detection of dominance, 258 segregation, 257 simplification, 258

Edwards, W., 178, 183–184 Einhorn, H. J., 178 Ellsberg Paradox, 241–242 Ellsberg, D., 242

Emotions role in choice, 297–299

Empirical discount factor, 331 Endowment effect, 82

loss aversion and, 85–87

English auction, 99–100, 103, 105–106 as a first-price open-bid auction, 99 people’s tendency in 100

minimum bid levels influence in, 100 rational prices in, 105–106

Eply, N., 52 Expectation, 101

Expected utility theory, 33, 127, 216 risk aversion under, 128

risk loving under, 131 risk neutrality under, 130

violations of, practical implications, 240–242

Experimental economics/Experiments

behavioral economics and, relationship between, 10–12

in causal relationship establishment, 12 Exponential time discounting, 311 External validity, 11

Eyster, E., 112, 114

F

Fairness, 427–431

Battle of the Sexes game, 429–431 fairness utilities in, 431 Prisoner’s dilemma, 443

cruelty, 428 Dictator game, 421

kindness function, 428, 432–443 material outcomes, 47

Falk, A., 424

False consensus, 180

Fehr, E., 420, 424, 439, 442, 447, 456, 466 First-price auctions, 95, 101–105

expectation, 101

probability of an outcome, 101 support, 101

uncertainty, 102 Fischbacher, U., 424 Fischhoff, B., 305 Fixed costs, 39

rational choice with, 18–21 sunk costs versus, 21–22

Flat-rate bias

procedural explanations for, 31–32 framing, 31

payment decoupling, 31 transaction utility and, 29–30

Flat-rate pricing, 18, 21 corner solution, 21 internal solution, 21

Forsythe, R., 395 Framing, 31, 55, 72–76

Frank, R. H., 405–406, 414 Freddie, 171n1, 172 Free-rider problem, 410

Fully additive model, 310–312 Fully cursed equilibrium, 112 Fungible money, 46

G

Gächter, S., 439, 442, 466 Gain–loss asymmetry, 335 Gambler’s fallacy, 177 Game, 93

Geanakoplos, J., 443–444

Generalized axiom of revealed preference (GARP), 400

Ghirardato, P., 244 Gifts, 62–64 Gilbert, D. T., 294 Gilboa, I., 243 Gill, M. J., 294 Gilovich, T., 176

Glaeser, E. L., 455, 462 Goldstein, D., 71–72 Gourville, J. T., 59

Grether, D. M., 163–165, 171, 178, 183 Gross, P. H., 190

Güth, W., 418

Guthrie, C., 226

H

Harbaugh, W. T., 408

Harstad, R. M., 96–97, 99

Heath, C., 45

Hedonic editing, 54

Hedonic framing, 55

Hernstein, R. J., 145, 147

Heuristics bidding, 99–100

decision mechanism, 8 representativeness, 165

Hindsight bias, 281–308, See also Projection bias and curse of knowledge, 303–306

Ho, T. -H., 236

Hoffman, E., 404 Hogarth, R. M., 178

Homo economicus, 6–7, 389–390, 401 Hortaçsu, A., 100

Hot–cold empathy gap, 297 modeling, 299–303

Hot hand theory, 176 Hot state, 297 Huang, M., 138

Hyperbolic discounting, 318–324, See also Naïve hyperbolic discounting

quasi-hyperbolic time discounting, 319 SNAP problem with, 323

Hypothesis-based filtering, 193 Rabin and Schrag’s model of, 196

I

Idson, L. C., 52 Illusion of control, 178

Immediate cost activity, 363 Immediate reward activity, 363 Income expansion path, 4

Income from varying sources, rational choice with, 42–45

Incremental bidding behavior, 98 Independence, 226–234

of irrelevant alternatives, 362–364 segmentation independence, 127, 132 statistical, 159

in preferences for consumer goods, 18–19, 25, 42–44, 49–51

Independence axiom, 159 allowing violations of, 234–236 in decision under risk, 226–234

Indifference curves, 60–61, 77–81 prospect theory and, 259–266 shape, 236–237

with constant loss aversion, 91–92 Indirect utility function, 42

Indirectly revealed preference, 397 Induced values, 98

Inequity aversion, 420–425 in dictator game, 421

Inference, 158

Infinite planning horizon, 310 Information, 208–210

bad information, 208–210 confirmatory information, 192 disconfirmatory information, 192 rational information search, 188–192

Instantaneous utility function, 284, 310 Integrated events, 47–48

Integrating, 52–55

Intermediate loss aversion, prospect theoretic value function with, 337

Internal validity, 11 Intertemporal choice, 282–286

with projection bias, 289 standard models of, 282–286

Intransitive preferences, modeling, 220–226 regret and similarity, 220–226

Investments, 57–60

Irrationality, 1–14 Isolation effect, 252–253

J

Jepson, C., 285

Johansson-Stenman, O., 462

Johnson, E. J., 54, 71–72, 75–76

Just, D. R., 27, 197

K

Kagel, J. H., 96–97, 99, 109n1, 114–116

Kahneman, D., 26, 37, 72, 78, 80, 86, 88–89, 142, 150, 163, 165–166, 170, 173–175, 179, 183–184, 219, 233, 247, 251–252, 255, 257, 259–260, 262, 266, 270–271, 275, 425, 436

Keefer, P., 458 Khoroshilov, Y., 35

Kindness functions, 428, 432–443 King, S., 376

Kirschsteiger, G., 439 Knack, S., 458

Knetsch, J. L., 72, 86, 88, 425, 436 Knight, F. H., 246

Knightian risk, 215

Knightian uncertainty, 215

Krause, K., 408

Kridel, D. J., 30, 33

L

Laibson, D., 324, 377–379

Lakshminarayanan, V., 82 Langer, E. J., 177

Law of large numbers, 159 Law of small numbers, 169–178

conservatism versus representativeness, 178–179 Ledgers, 45

Lehman, D. E., 30, 33 Leland, J, 225 Lepper, M., 198

Levin, D., 96–97, 99, 114, 116 Lichtenstein, S., 179, 219 Liday, S. J., 408

Likelihood function, 161 Linear pricing, 18

List, J. A., 88

Loewenstein, G., 31, 55–56, 67, 72, 74, 143, 149–150, 209, 285, 288, 297, 304, 336, 340, 342

Loomes, G., 218, 221–222, 267 Loomes’ Portfolio problem, 268 Lord, C., 198

Loss aversion, 26, 253–257 constant additive loss aversion, 81 constant loss aversion, 80

shape of the indifference curve with, 91–92 in consumption space, 78–79

and endowment effect, 85–87 evolutionary explanation for, 81–82

intermediate loss aversion, 337–338, 342–343 strong loss aversion, 52–54

Lovallo, D., 150, 202, 204 Lubatkin, M. H., 391 Lucking-Reiley, D., 99, 105 Lundberg, S., 391

M

Maccheroni, F., 244

Machina, M. J, 229

Madden, G. J., 335

Madrian, B., 75

Mahmud, M., 462 Mak, D., 52

Malmendier, U., 30, 197, 369 Mandel, G. N., 303

Marginal costs, rational choice with, 18–21 Marginal utility, 4

Marinacci, M., 244

Marketplace, trust in, 460–465, See also under Trust Marschak, J., 229

Marschak–Machina triangle, 228 Martinsson, P., 462

Maxmin expected utility theory, 243 α-maxmin expected utility theory, 244

McCabe, K., 404, 451 McKelvey, R. D., 402–403 Mead, W. J., 110 Melioration, 137, 146–149 Mental accounting, 41–69

accounts, 62–64

accounts, integrating, or segregating, 52–55

budgeting bundles, 49–52 budgets, 62–64

closing accounts, 57–60 consumption bundles, 49–52 credit card purchases, 55–57 gifts, 62–64

investments, 57–60 opening, 57–60

payment decoupling, 55–57 prepurchase, 55–57

rational choice over time, 64–66

rational choice with income from varying sources, 42–45

rational choice, temptation and gifts versus cash, 61–62

reference points and indifference curves, 60–61

temptation, 62–64 theory of, 45–49

Mental urn, 170

Miller, J., 397, 400–401 Miravete, E. J., 33 Money pump, 218 Moral hazard, 460

Morgenstern, O., 228, 246 Moseidjord, A., 110 Mullainathan, S., 182 Multiple events, 52

Multiple rational choice with certainty and uncertainty, 126–133

Murnighan, J. K., 423 Mynatt, C. R., 192

N

Naïfs, 368–371

Naïve decision makers, 352–354 Naïve hyperbolic discounting, 318–324

naïve quasi-hyperbolic discounting, 324–330

Naïve procrastination, 309–346 discounting in continuous time, 312–313 fully additive model, 310–312

Narrow bracketing, 135–139 and motivation, 149

Nash equilibrium, 95 Navarrete, J., 220

Negatively correlated random variable, 159 Neilson, W., 270

Nicholson, W., 4 Node, 95

Nonexcludable good, 409 Nonoptimality between budgets, 50 Nonrival good, 409

Nordhaus, W. D., 28 Normal distribution, 158

O

O’Donoghue, T., 288, 296, 361, 368, 370 Ockenfels, A., 97– 98

Odean, T., 58, 205

Odum, A. L., 335 One-tailed test, 157 Opportunism, 464

Optimistic overconfidence, 204 Order axiom, 217

Oskamp, S., 206, 210

Overbidding, procedural explanations for, 97 Overconfidence, 204–207

of one’s own knowledge, 204 optimistic overconfidence, 204

P

Palfrey, T. R., 402–403 Pareto optimal outcomes, 432 Partial naïf, 368

Payment decoupling, 31, 55–57 Payment depreciation, 57 P-bet, 219

Peanuts effect, 148–150 Pearce, D., 443–444 Phelps, E. A., 462 Pieters, R, 226

Policies and sunk cost reasoning, 24 Portfolio problem, 133–134, 153–154

bracketing, 139, 154–155 Positional externalities, 406

Positively correlated random variable, 159 Postlewaite, A., 209

Precision, 162

Preference formation, 72–76 Preference reversals, 77, 219 Preferences, 3

complete, 3 transitive, 3

Prelec, D., 31, 55–56, 72, 74, 336 Prepurchase, 55–57

Present biased preferences, 323 Preston, M. G., 237

Primacy effect, 178 Prior function, 161

Prisoner’s Dilemma, 443–446 Probability density function, 119 Probability of an outcome, 101 Probability weighting, 232, 237–240, 257

without preferences for dominated, 239–240 shape, evidence on, 237–239

Procedural explanations for flat-rate bias, 31–32

Procedural rational model, 9 Procrastination, 309–346, See also Naïve

procrastination Profit-maximization model, 2, 7

Projection bias, 281–308, See also Hindsight bias; Intertemporal choice

and addiction, 290

addictive behaviors with, 292 Prorate future payments, 56

Prospect theory, 26, 78, 250–277, See also Cumulative prospect theory

cumulative prospect theory, 259

decision under risk or uncertainty, 250–277 isolation effect, 252–253

loss aversion, 253–257 reflection effect, 251–252 risk aversion, 253–257 risk loving, 253–257

effectiveness of, 267–269

and indifference curves, 259–266

and risk aversion in small gambles, 269–274 three-component version of, 257

editing, 257

probability weighting, 257 value function, 257

value function, 47 discounting with, 336–343

with intermediate loss aversion, 337 Psychological games, 443–449

Prisoner’s Dilemma, 421–446 psychological equilibrium, 444

Public goods provision and altruistic behavior, 409–413

nonexcludable good, 409 nonrival good, 409

Public policy and sunk cost fallacy, 24

Q

Quasi-hyperbolic time discounting, 319, 324 Quiggin, J., 240

R

Rabin, M., 112, 114, 117, 140–141, 149–150, 170–171, 171n1, 193, 196, 269–270, 273, 288, 361, 368, 370, 427–429, 432, 443

Rabin’s Theorem, 142

Raiffa, H., 200–201

Ranney, C. K., 317

Ransom, M. R., 208 Rapoport, A., 326, 331, 333

Rational bidding in auctions, 93–98 in Dutch, 105–106

in English, 105–106

first-price auctions, 101–106, See also individual entry

overbidding, procedural explanations for, 97 rationality levels, 98–99

second-price auction, 93 uncertainty in, 107–110 under Dutch, 101–105

Rational bracketing for variety, 144

Rational choice, 39, 126–133, See also Multiple rational choice

with fixed and marginal costs, 18–21 and getting and giving up goods, 83–85 with income from varying sources, 42–45 over time, 64–66

temptation and gifts versus cash, 61–62 theory, 2–4

Rational decision under risk, 215–220, 226–234

Rational explanations

for contextdependent preferences, 36–37 of status quo bias, 76–77

for sunk cost fallacy, 28–29 for winner’s curse, 117

Rational information search, 188–192 Rational modeling, 1–4

preferences, 3

Rationality, 1–14, See also Bounded rationality and altruism, 392–397

and demand curves, 4–8 Rationalization, 1–14

Rationally selfless, question of, 397–403 Read, D., 143, 149–150, 294

Recency effect, 178 Reciprocity, 466–469

as a business model, 468–469 fairness and, 467–468

Recursive optimization problem, 348 Reference points, 34–36, 60–61, 77–81 Reference structure, 78

Reference transaction, 425 Reflection effect, 251–252 Regret theory, 221–226

dependent option, 224 regret aversion, 221

regret theory utility function, 221 similarity in preference cycling, 224 skew symmetric utility function, 221

Relative risk aversion, 131

Representativeness, 165–166, See also Law of small numbers

and availability, 156–186 availability heuristic, 180–181 base rate neglect, 165 calibration exercises, 162–164 conservatism versus, 178–179 heuristic, 165

history, 183

statistical inference and information, 157–162 Revealed preference, 397

directly revealed, 397 indirectly revealed, 397 strictly revealed, 400

Revenues minus costs, 7 Reversion to mean, 175 Richard, J. -F., 109n1 Risk, 215

independence decision under, 226–234 rational decision under risk, 226–234 risk premium, 205

Risk aversion, 106, 128, 140–143, 253–257 and concavity, 254

and production, 203–204

and prospect theory value function, 256 in small gambles, 269–274

under expected utility theory, 128 Risk loving, 130, 253–257

and convexity, 254

and prospect theory value function, 256 under expected utility theory, 131

Risk neutrality under expected utility theory, 130 Roberson, B., 104

Ross, L., 198

Ross, M., 207

Roth, A. E., 97–98, 423 Rothbart, M., 182 Rowthorn, R., 465 Rubinstein, A., 224–225

S

Sacket, D. L., 285

Salience, 73

Samuelson, P. A, 6, 28, 132–133, 135–136, 138, 246

Samuelson, W. F., 76–77, 114–115

Sandmo, A., 28

Santos, L., 82 Scharlemann, J. P. W., 457 Schmeidler, D., 243 Schmidt, K. M., 420 Schmittberger, R., 418 Schrag, J. L., 193, 196 Schulze, W. S., 391 Schwarze, B., 418 Secondary data set, 10

Second-price auctions, 93, 96 Segmentation independence, 127 Segregated events, 47–48 Segregation, 52–55, 257 Selfishness, 389–416

rationally selfless, question of, 397–403 selfishly selfless, 403–408

Self-serving bias, 207–208, 423 Shea, D., 75

Shefrin, H. M., 62–63 Shelor, R. M., 181 Sicoly, F., 207

Significantly different mean, 159 Similarity in preference cycling, 224 Simon, C. P., 13

Simon, H. A., 8, 12 Simonson, I., 143–144, 150 Simple projection bias, 289 Simplification, 258

Single Budget Category, 50

Skew symmetric utility function, 221 Slovic, P., 219, 465, 470

Smith, V. L., 104, 404 Snyder, C. F., 4 Snydor, J., 272–273 Social capital, 455 Social heuristics, 150 Social norm, 453

Social preferences, 389, See also Altruism Sokol-Hessner, P., 462

Soll, J. B., 45

Soman, D., 59

Sophisticated decision makers, 352–354 Sorensen, P. E., 110

Source-based consumption and application, rational explanations for, 66–67

Spencer, M., 52

Spiteful players, 420 Stacchetti, E., 443–444 Stahl, D. O., 98

Standard normal distribution, 158 Stanley, D. A., 462

Starmer, C, 215, 218, 221–222, 232–233 Stationarity, 312

Status quo bias, 70–92

rational explanations of, 76–77 Stevenson, B., 407

Stochastically dominant gamble, 217 Strategy, 96

Strong axiom of revealed preference (SARP), 398 Strotz, R. H., 313, 318, 344

Subadditivity, 232

Subgame-perfect Nash equilibrium (SPNE), 402 Subjective expected utility theory, 242 Subproportionality, 338–339

Sugden, R., 218, 221–222 Sundali, J., 177

Sunk cost fallacy, 22–24 public policy and, 24

Sunk costs

fixed costs versus, 21–22 in prospect theory, 26

rational explanations for, 28–29 reactions to, 25–28

theory, 25–28 Sunstein, C., 37

Superadditive probabilities, 239 Svenson, O., 207

T

Take-It-or-Leave-It game, 401–403, 457 Tate, G., 197

Taylor series approximation, 332 Temptation, 62–64

Thaler, R. H., 18, 22, 25–27, 34, 37, 54, 62–63, 72, 86, 88, 116, 135–137, 150, 319, 330–331, 360, 425, 436

Theory and reference-dependent preferences, 35–36

Time inconsistency, commitment under, 351–360 Time-inconsistent preferences, 282, 288

TIOLI games, See Take-It-or-Leave-It game Torrance, G. W., 285

Train, K. E., 33

Transaction utility, 17–40, 48

and consumer preferences in reference, 34–35

definition, 18

and flat-rate bias, 29–30

rational explanations for contextdependent preferences, 36–37

theory and reference-dependent preferences, 35–36

Transactions costs, 461 Transitive preference, 3 Transparency, bidding, 99–100 Trust, 450–471

and distrust, 465–466 in marketplace, 460–465

transactions costs, 461 trust game, 451

behavior in, 452

with information on history, 454 and trustworthiness, 455–460

cheap talk, 455 social capital, 455

Take-It-or-Leave-It Trust Game, 457 Tversky, A., 26, 89, 142, 163, 165–166, 170,

173–176, 179, 183–184, 219, 233, 247, 251–252, 255, 257, 259, 260, 262, 266, 270–271, 275

Tweney, R. D., 192 Two-part tariff, 18–20 corner solution, 19

internal solution, 20

Two-period consumption model without discounting, 65

Two-tailed test, 158

U

Ubel, P. A., 285 Ultimatum game, 418 Uncertainty, 102, 215

in auctions, 106–107 in bidding, 119–121

in multiple rational choice, 126–133 in rational bidding, 107–110

Uncommiting mechanisms, 374–377 Unraveling effect, 402