Introduction to Behavioral

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2
Why do sellers often value their goods or assets much higher than buyers?
3
Why are people willing to drive across town to save $5 to purchase a $15 calculator 
but not to purchase a $125 jacket?
4
Why are the fresh fruit and vegetables usually found at the entrance of the 
supermarket when they are easily damaged in the shopping trolley?
5
Why are people delighted to hear they are going to get a 10% raise in salary, and 
then furious to fi nd out that a colleague is going to get 15%?
6
Why do people forever make resolutions to go on a diet or stop smoking, only to 
give in later?
7
Why do people go to the ATM and withdraw a measly $50?
8
Why do people prefer to postpone a treat like a luxury dinner rather than have it 
sooner?
9
Why is someone unwilling to pay $500 for a product, but then delighted when 
their spouse buys them the same product for the same price using their joint bank 
account?
10
Why is someone willing to drive through a blizzard to go to see a ball game when 
they have paid for the ticket, but not when they have been given the ticket for free?
11
Why are people willing to bet long odds on the last race of the day, but not on 
previous races?
None of these questions is readily answerable using the standard model, because of 
the restrictive nature of the assumptions involved. In some cases there are anomalies, 
meaning that the standard model makes inaccurate predictions; in other cases the 
standard model is incomplete or silent, meaning that it cannot make predictions at all.
Both aspects together have been key drivers in the rapid development of behavioral 
economics as an emerging subdiscipline of economics.
The relationship between the standard model and behavioral economics in the 
light of those limitations may be described as follows: every model has a