Recent developments in virtual reality (VR) technology have the potential to revolutionize the way economists do experimental research. With Oculus’ light and affordable head mounted display (HMD) human subjects can literally move and use objects in virtual spaces and interact with others. This technology as well as surround-screen projection systems like CAVEs (Cruz-Neira et al. 1994), allow the experimenter to observe economically relevant behavior and social interaction in a highly immersive and at the same time tightly controlled virtual environment. More than other disciplines, economics focuses on the evaluation of counterfactual scenarios which help to analyze strategic decisions and their efficiency effects. In this note, by means of three examples, we illustrate how experiments in highly IVEs can add value to experimental economics and benefit economic research.
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Behavioral economics attempts to integrate insights from psychology, neuroscience, and sociology in order to better predict individual outcomes and develop more effective policy. While the field has been successfully applied to many areas, education has, so far, received less attention – a surprising oversight, given the field’s key interest in long-run decision-making and the propensity of youth to make poor long-run decisions. In this chapter, we review the emerging literature on the behavioral economics of education. We first develop a general framework for thinking about why youth and their parents might not always take full advantage of education opportunities. We then discuss how these behavioral barriers may be preventing some students from improving their long-run welfare. We evaluate the recent but rapidly growing efforts to develop policies that mitigate these barriers, many of which have been examined in experimental settings. Finally, we discuss future prospects for research in this emerging field.
When it comes to valuing stocks, the most reliable valuations come from imaginative number crunchers and disciplined storytellers, says Aswath Damodaran. And too often pure “numbers” people drift off into what he calls “spreadsheet nirvana.” Similarly, investors who focus purely on the narrative of a potential investment run the risk of quickly “veering from reality to fantasy.”
Damodaran, who teaches valuation and corporate finance at the Stern School of Business at New York University (NYU), made these remarks at the recent CFA Institute Equity Research and Valuation Conference 2014 inBoston, where he urged attendees to bridge the gap between numbers and narratives, insisting that the best valuations are not just “a collection of numbers, but a story connected to numbers.”
Damodaran acknowledged the critical role that numbers play in the valuation process, but he warned that they should be used judiciously. Due to mission creep, he thinks accounting statements have become increasingly difficult to navigate and fair value accounting has become an oxymoron, allowing for bias and the illusion of objectivity in valuations. Similarly, the emergence of Big Data as an input into sophisticated valuation models driven by “Excel Ninjas,” and the accompanying notion that “more is better,” has its limits. Adding an extra decimal place to your model’s projected operating profit margin conveys a false sense of precision with no meaningful improvement in outcomes.
In recent years, behavioral economics has emerged as a bona ﬁde subdiscipline of economics (cf. [Rabin, 2002, 657–658; Sent, 2004, 735–737]). At the time of writ-ing, virtually all top U.S. economics departments have behavioral economists onstaff. Behavioral papers appear in prime journals, and the number of doctoral dissertations, conferences, hirings, tenurings, etc. is increasing rapidly. Meanwhile,behavioral economists have been awarded the highest recognitions: MacArthur Fel-lowships, the John Bates Clark Medal, and most prominently, the Nobel MemorialPrize. Although a comparatively young ﬁeld, it is possible to discern relativelydistinct phases in the development of behavioral economics. The ﬁrst phase, whichwe will argue began in 1980, involved identifying anomalies — commonly observedeconomic phenomena that were inconsistent with standard theory — and explain-ing them in relatively loose psychological terms. The second, which began ap-proximately a decade later, incorporated behavioral assumptions into increasinglysophisticated, mathematically rigorous models of economic phenomena at boththe micro and the macro levels [Rabin, 2002, 658]. The third phase, once againunfolding approximately a decade later, has involved the systematic application of behavioral economics to issues of public policy (see, e.g., [McCaﬀery and Slemrod,2006; Diamond and Vartiainen, 2007]).
Do you know of anyone who has suppressed bad news to preserve their career or reputation?Or told the boss what they wanted to hear instead of the truth?Or overlooked a red flag to preserve the sense of harmony in the workplace?Most often ego is catalogued as ‘good’ or ‘bad’, but what if it’s simply about your relationship with yourself? At the heart of the matter your ego, your self-esteem, self-worth and personal sense of security, chaperons your decision-making. Does the business culture have an impact on your ego?It’s absurd to pretend that the business culture doesn’t have an
See on Scoop.it – Bounded Rationality and Beyond
Categories: Alternative Investments, Behavioral Finance, Drivers of Value, Economics,Leadership, Management & Communication Skills, Portfolio Management, Standards, Ethics & Regulations (SER) Suddenly, proponents of the urban myth that our drinking water is poisoned seem to be correct. Scientists have discovered traces of the harmful and addictive drug cocaine in the United Kingdom’s water supply even after it had been intensively purified. According to one newspaper headline, “Cocaine Use in Britain Is So High It Has Contaminated Drinking Water.” But this is small fry compared to the scale of contamination of US drinking water. With 10% of Americans now taking antidepressantsand half on prescribed medications, “your tap water is probably laced with antidepressants” and harmful chemicals according to one report. Worse still, studies are blaming contaminated water for physical and behavioral changes, such as fish losing interest in their food, or even becoming “intersex” fish whereby male fish grow ovaries and start laying eggs. As markets hit new highs, we explore whether rational economic man, the bedrock of many financial theories and valuation models, is subject to unseen and adverse physiological influences.
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Yes, you can bet on presidential elections. And gamblers betting on the election have a pretty good history of predicting the next US president. Better than the bulk of polls and surveys, in fact. …