Overview

"Conventional economic theory assumes that consumers are fully rational, that they have well-defined preferences and easily understand the market environment. Yet, in fact, consumers may have inconsistent, context-dependent preferences or simply not enough brain-power to evaluate and compare complicated products. Thus the standard model of consumer behavior-which depends on an ideal market in which consumers are boundlessly rational-is called into question. While behavioral economists have for some time confirmed and characterized these inconsistencies, the logical next step is to examine the implications they have in markets.Grounded in key observations in consumer psychology, Bounded Rationality and Industrial Organization develops non-standard models of ""boundedly rational"" consumer behavior and embeds them into familiar models of markets. It then rigorously analyses each model in the tradition of microeconomic theory, leading to a richer, more realistic picture of consumer behavior. Ran Spiegler analyses phenomena such as exploitative price plans in the credit market, complexity of financial products and other obfuscation practices, consumer antagonism to unexpected price increases, and the role of default options in consumer decision making. Spiegler unifies the relevant literature into three main strands: limited ability to anticipate and control future choices, limited ability to understand complex market environments, and sensitivity to reference points. Although the challenge of enriching the psychology of decision makers in economic models has been at the frontier of theoretical research in the last decade, there has been no graduate-level, theory-oriented textbook to cover developments in the last 10-15 years. Thus, Bounded Rationality and Industrial Organization offers a welcome and crucial new understanding of market behavior-it challenges conventional wisdom in ways that are interesting and economically significant, and which in the end effect the well-being of all market participants."

Full Product Details

Author:   Ran Spiegler (Professor, Professor, Department of Economics, University College London) ,  Professor Ran Spiegler (Department of Economics, University College London)
Publisher:   Oxford University Press Inc
Imprint:   Oxford University Press Inc
Dimensions:   Width: 23.10cm , Height: 1.50cm , Length: 15.50cm
Weight:   0.340kg
ISBN:  

9780199334261

ISBN 10:   0199334269
Pages:   240
Publication Date:   27 February 2014
Audience:   College/higher education ,  Professional and scholarly ,  Postgraduate, Research & Scholarly ,  Professional & Vocational
Format:   Paperback
Publisher's Status:   Active
Availability:   To order  
Stock availability from the supplier is unknown. We will order it for you and ship this item to you once it is received by us.

Table of Contents

"1 Introduction 1.1 Bibliographic Notes I Anticipating Future Preferences 2 Dynamically Inconsistent Preferences I: Unconstrained Contracting 2.1 The Multi-Selves Model 2.1.1 Naivety 2.2 Monopoly Pricing 2.2.1 Optimal Price Schemes for Sophisticated Consumers 2.2.2 Optimal Price Schemes for Naive Consumers 2.2.3 Screening the Consumer's Type 2.3 Competitive Pricing 2.4 Welfare Analysis 2.5 Educating Naive Consumers 2.6 The Interpretation of Naivety 2.7 Two Applications 2.8 Other Topics 2.8.1 The (?, ?) Model 2.8.2 Preference Heterogeneity 2.9 Summary 2.10 Bibliographic Notes 3 Dynamically Inconsistent Preferences II: Constrained Contracting 3.1 Two-Part Tariffs 3.1.1 Departure from Marginal-Cost Pricing 3.1.2 Welfare Analysis 3.2 Destabilization of Commitment Devices: Renegotiation and Spot Market Competition 3.3 Self-Control 3.3.1 Implications for Monopoly Pricing 3.3.2 Do Self-Control Costs Hamper Competition? 3.4 Summary 3.5 Bibliographic Notes 4 Dynamically Inconsistent Preferences III: Partial Naivety 4.1 Magnitude Naivety 4.1.1 Monopoly Pricing 4.1.2 Are More Sophisticated Consumers Always Better Off? 4.2 Frequency Naivety 4.2.1 First-Best Monopoly Pricing 4.2.2 Second-Best Monopoly Pricing 4.2.3 Does Competition Curb Exploitation? 4.3 Summary 4.4 Bibliographic Notes 5 Biased Beliefs without Dynamic Inconsistency 5.1 Monopoly Pricing with Over-Optimistic Consumers 5.1.1 Comparison with Related Models 5.2 Overconfidence: Three-Part Tariffs 5.3 Unforeseen Contingencies: Add-On Pricing 5.4 A Summary Exercise: Insurance Markets with Biased Consumers 5.4.1 Equilibrium Analysis when Subjective Beliefs are Observable 5.4.2 Equilibrium Analysis when Subjective Beliefs are Private Information 5.5 Summary 5.6 Bibliographic notes A Appendix to Part I: A Decision-Theoretic Perspective A.1 The Multi-Selves Model A.2 Self-Control Preferences A.3 The Relation between Self-Control Preferences and the Multi-Selves Model A.4 Other Classes of Temptation-Driven Preferences A.5 Bibliographic Notes II Responding to Market Complexity 6 Sampling-Based Reasoning: Price Competition and Product Differentiation 6.1 A Sampling-Based Choice Procedure 6.2 Price Competition and Technology Adoption 6.2.1 Nash Equilibrium 6.2.2 Welfare Analysis 6.3 Spurious Product Differentiation 6.3.1 Nash Equilibrium 6.3.2 Product Complexity as a Differentiation Device 6.4 Can the Market Educate Consumers? 6.5 Summary 6.6 Bibliographic Notes 7 Sampling-Based Reasoning: Obfuscation 7.1 A Model of Competitive Obfuscation 7.1.1 Nash Equilibrium 7.1.2 Welfare Analysis 7.2 Production Inefficiencies 7.3 Multi-Dimensional Prices 7.4 A Market Intervention: Introducing \Simple"" Options 7.5 Summary 7.6 Bibliographic Notes 8 Coarse Reasoning 8.1 A Modeling Framework 8.2 Complex Price Patterns as a Discrimination Device 8.2.1 ""DeBruijn"" Price Sequences 8.2.2 Conditions for Profitability of Complex Price Patterns 8.3 Limited Understanding of Adverse Selection 8.3.1 A Buyer-Seller Example 8.3.2 A Benchmark: A Bayesian-Rational Buyer 8.3.3 A \Coarse"" Buyer 8.3.4 Action-Dependent Feedback 8.4 Summary 8.5 Bibliographic Notes III Reference Dependence 9 Loss Aversion 9.1 Expected Price as a Reference Point: Monopoly Pricing 9.1.1 Reduced Price Variability 9.1.2 Impact on Expected Prices 9.2 Price Uniformity in a Duopoly Setting: \Kinked"" Demand 9.3 Expected Consumption as a Reference Point: An \Attachment Effect"" 9.3.1 Personal Equilibrium 9.3.2 Price Randomization 9.4 Discussion 9.4.1 Actual Prices as Reference Points 9.4.2 Pleasant Surprises 9.5 Summary 9.6 Bibliographic Notes 10 Inertia I: Price Competition 10.1 Price Competition under Consumer Inertia 10.2 Price-Frame Competition 10.2.1 Nash Equilibrium 10.2.2 Equilibrium Properties 10.2.3 Two Market Interventions 10.3 Consumer Switching 10.4 Asymmetric Default Assignment 10.5 A Few General Remarks 10.5.1 More than Two Frames 10.5.2 Revealed Preferences 10.6 Summary 10.7 Bibliographic Notes 11 Inertia II: Costly Marketing 261 11.1 A Model of Competitive Marketing 11.2 Nash Equilibrium 11.3 The Effective Marketing Property 11.4 Discussion 11.5 Summary 11.6 Bibliographic Notes IV Discussion 12 Recurring Themes 12.1 Complex Pricing Strategies 12.2 Spurious Variety 12.3 Market Transactions as a Form of Speculative Trade 12.4 How Effective are Competition and Consumer Protection Policies? 12.5 Externalities between Rational and Boundedly Rational Consumers 12.6 Conclusion 13 But Can't we Get the Same Thing with a Standard Model? 13.1 Rationalization via Modified Information 13.2 Rationalization via Modified Preferences 13.3 Rationalization via Endogenization 13.4 Discussion 13.5 Epilogue 13.6 Bibliographic Notes Bibliography Index"

Reviews

Nobody thinks like Adam Smith when buying a toothbrush, but this is the assumption of consumer behavior offered in traditional economics textbooks. Marketing experts used to laugh at such naivety, but they will have to take economic theory more seriously from now on. Ran Spiegler's book takes on the challenge of rewriting the theory of industrial organization without the classical assumption that economic agents are all rational supermen. This is an important book that nobody working on industrial organization will wish to be without. --Ken Binmore, University College London Spiegler's Bounded Rationality and Industrial Organization is a beautifully written book. He makes a compelling case that understanding what happens when boundedly rational consumers meet sophisticated firms is both intellectually interesting and practically important. He has a wonderful feel for using rigorous models to clarify arguments and develops insights from a number of branches of the emerging literature in a parsimonious way. It is a must read book. --Glenn Ellison, Massachusetts Institute of Technology In Ran Spiegler's typical style, perfectly crafted simple models are used to illustrate deep ideas that lie at the heart of existing frontier research and, no doubt, future research this book is bound to inspire. -Jeffrey Ely, Northwestern University In a timely and indispensable contribution, Ran Spiegler presents formal, elegant, and stylized models that synthesize and find common ground in previous approaches to incorporating non-standard assumptions of consumer behavior into otherwise standard market settings. His textbook will be an extremely valuable source for students wanting to learn more about modeling bounded rationality. And his unifying models will likely set the stage for further contributions in this exciting area. --Ignacio Esponda, Stern School of Business, New York University Over the past decade, Ran Spiegler has been a market lea

Spiegler's Bounded Rationality and Industrial Organization is a beautifully written book. He makes a compelling case that understanding what happens when boundedly rational consumers meet sophisticated firms is both intellectually interesting and practically important. He has a wonderful feel for using rigorous models to clarify arguments and develops insights from a number of branches of the emerging literature in a parsimonious way. It is a must read book. * Glenn Ellison, Massachusetts Institute of Technology * Nobody thinks like Adam Smith when buying a toothbrush, but this is the assumption of consumer behavior offered in traditional economics textbooks. Marketing experts used to laugh at such naivety, but they will have to take economic theory more seriously from now on. Ran Spiegler's book takes on the challenge of rewriting the theory of industrial organization without the classical assumption that economic agents are all rational supermen. This is an important book that nobody working on industrial organization will wish to be without. * Ken Binmore, University College London *

<br> Nobody thinks like Adam Smith when buying a toothbrush, but this is the assumption of consumer behavior offered in traditional economics textbooks. Marketing experts used to laugh at such naivety, but they will have to take economic theory more seriously from now on. Ran Spiegler's book takes on the challenge of rewriting the theory of industrial organization without the classical assumption that economic agents are all rational supermen. This is an important book that nobody working on industrial organization will wish to be without. --Ken Binmore, University College London<p><br> Spiegler's Bounded Rationality and Industrial Organization is a beautifully written book. He makes a compelling case that understanding what happens when boundedly rational consumers meet sophisticated firms is both intellectually interesting and practically important. He has a wonderful feel for using rigorous models to clarify arguments and develops insights from a number of branches of the emerging literature in a parsimonious way. It is a must read book. --Glenn Ellison, Massachusetts Institute of Technology<p><br> In Ran Spiegler's typical style, perfectly crafted simple models are used to illustrate deep ideas that lie at the heart of existing frontier research and, no doubt, future research this book is bound to inspire. -Jeffrey Ely, Northwestern University <br><p><br> In a timely and indispensable contribution, Ran Spiegler presents formal, elegant, and stylized models that synthesize and find common ground in previous approaches to incorporating non-standard assumptions of consumer behavior into otherwise standard market settings. His textbook will be an extremely valuable source for students wanting to learn more about modeling bounded rationality. And his unifying models will likely set the stage for further contributions in this exciting area. --Ignacio Esponda, Stern School of Business, New York University<p><br> Over the past decade, Ran Spiegler has been a market lea

Author Information

Professor of Economics at Tel Aviv University and University College London

Tab Content 6

Author Website:  

Customer Reviews

Recent Reviews

No review item found!

Add your own review!

Countries Available

All regions