Psychology-meets-micro: limited attention, biases, fairness, procrastination, and why revealed preferences diverge from simple models.
When consumers do not read the fine print, standard IO stories about competition change. This essay explains shrouding, teaser rates, and add-on pricing with links to [prospect theory](/articles/prospect-theory-policy) and the [antitrust consumer-welfare frame](/articles/chicago-antitrust-bork-consumer-welfare), without excusing every regulatory impulse.
Behavioral economics assumes biases are mistakes to correct — but what if overconfidence, optimism, and loss aversion serve adaptive functions? A case for humility in behavioral policy.
Muth's elegant hypothesis reshaped macroeconomics and disciplined a generation of models — but decades of psychological evidence on how people actually form beliefs have reopened the question of what expectations are rational.
From Thaler and Sunstein's 'Nudge' to the UK Behavioural Insights Team — how default effects, friction, and libertarian paternalism reshaped policy, and why critics worry about manipulation.
When consumers do not notice add-on fees, processing information is costly, and tax salience shapes behavior, standard industrial organization breaks down — and firms know it.
The story of two Israeli psychologists who upended rational choice theory — their backgrounds, their landmark 1974 paper, and how the heuristics-and-biases research program entered economics and reshaped it.
How Vernon Smith brought markets into the laboratory, why double auctions converge to equilibrium with startling speed, and how experimental economics shaped the design of real-world auctions and matching markets.
Why people plan to save, diet, and exercise — and then don't. From Strotz's changing preferences to Laibson's beta-delta model, how economists learned to take self-control seriously.
How Kahneman and Tversky's 1979 paper overturned expected utility theory — and why loss aversion, reference dependence, and probability weighting reshape how we think about tax policy, insurance, and retirement savings.