Economists Do It With Models

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Entries Tagged as 'Buyer Beware'

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When Transaction Utility Goes Awry, Starbucks Edition…

May 29th, 2014 · 3 Comments
Behavioral Econ · Buyer Beware

Traditional economic models assume that the utility, or happiness, one gets from consuming an item depends only on how fundamentally useful the item is to the consumer. Under this model, an item’s utility must be independent from the price that the consumer paid for the item, since it’s hard to envision a scenario where the [...]

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Tags: Behavioral Econ · Buyer Beware

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On Economists Giving Thanks, And The Avoidance Of Arms Races…

November 28th, 2013 · 2 Comments
Behavioral Econ · Buyer Beware · Game Theory · Policy

First off, HAPPY THANKSGIVING! I am very thankful that you all read my online ramblings Once you get drowsy from eating too much Thanksgiving dinner (and no, it’s not the turkey, that’s mostly an urban legend, unless of course you ate the entire turkey), you should feast on what Dan Ariely has to say about [...]

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Tags: Behavioral Econ · Buyer Beware · Game Theory · Policy

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Fun With Positional Goods, Coach Edition…

October 23rd, 2013 · 1 Comment
Buyer Beware · Markets

We talk about a lot of different types of goods in economics- normal goods, inferior goods, Giffen goods, Veblen goods, etc. So what is a positional good? I will let Sheldon from the Big Bang Theory explain: Raj: Dude, I’m glad you finally got a girlfriend, but do you have to do all that lovey-dovey [...]

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Tags: Buyer Beware · Markets

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Sooo…Does This Mean We’re In a Banksy Bubble?

October 15th, 2013 · 5 Comments
Behavioral Econ · Buyer Beware · Markets

While Eugene Fama may claim to not know what a bubble is, I’m pretty sure that the generally accepted definition is something along the lines of “a situation in which the price of an asset is significantly above its fundamental intrinsic value.” A couple of years back, Planet Money illustrated that a kitten bubble could [...]

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Tags: Behavioral Econ · Buyer Beware · Markets

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Fun With Monopolies, Diamond Edition, And More Examples for Your Classroom…

June 15th, 2013 · 8 Comments
Buyer Beware · Econ 101 · Markets

So, it’s that time of year again, when, as a complement to June wedding season, the media is inundating its readers with stories related to marriage. (Yes, those were all different links, and that’s just a small sample from one source.) I usually don’t pay much attention (get married, don’t get married, invite whomever you [...]

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Tags: Buyer Beware · Econ 101 · Markets

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A Test Of Bounded Rationality, Alarm Clock Edition…

June 14th, 2013 · 3 Comments
Behavioral Econ · Buyer Beware

One of the key differences between traditional and behavioral economics is that, while the assumptions of traditional economics stipulate that people always have the cognitive and psychological faculties to make the choices that are in their long-term best interests, behavioral economics focuses on identifying the situations in which these assumptions don’t hold. For example, traditional [...]

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Tags: Behavioral Econ · Buyer Beware