Behavioral Economics: Evidence, Theory, and Welfare provides an engaging and accessible introduction to the motivating questions, real-world evidence, theoretical models, and welfare implications of behavioral economics concepts. Applications and examples — from household decisions, finance, public finance, labor, business, health, development, politics, education, energy, and sports — illustrate the broad relevance of behavioral economics for consumers, firms, markets, and policy makers alike.

This textbook provides readers with both the intuition and analytical tools to apply behavioral economics concepts in understanding the complex social world. Each part of the book covers a key concept, beginning with a range of empirical evidence that is anomalous within the standard economics framework. In light of this evidence, a second chapter introduces and applies a nonstandard behavioral modeling approach. The last chapter of each part explores market reactions and policy responses to individuals behaving in nonstandard ways. Numerous exercises of varying types and levels provide readers the opportunity to check and enrich their understanding.

The book’s clear structure orients readers to the many concepts of behavioral economics. It also highlights the process by which economists evaluate evidence and disentangle theories with different social welfare implications. Accessible to students from diverse economic backgrounds, this textbook is an ideal resource for courses on behavioural economics, experimental economics and related areas. The accompanying Solutions Manual further extends learning and engagement.

part I|60 pages


chapter 1|9 pages


chapter 2|23 pages

Standard Decision Making

chapter 3|26 pages

Behavioral Welfare Economics

part II|122 pages

Intertemporal Preferences

chapter 4|28 pages

Discounted Utility Model Anomalies

chapter 5|36 pages

Present Bias

chapter 6|26 pages

Consumption Dependence

chapter 7|30 pages

Market & Policy Responses to Present Bias

part III|74 pages

Reference-Dependent Preferences

chapter 8|23 pages

Reference-Independence Anomalies

chapter 9|32 pages

Reference Dependence

chapter 10|17 pages

Market & Policy Responses to Loss Aversion

part IV|40 pages

Preferences over Uncertainty

chapter 11|13 pages

Expected Utility Anomalies

chapter 12|25 pages

Non-Expected Utility

part V|69 pages

Social Preferences

chapter 13|13 pages

Self-Interested Preference Anomalies

chapter 14|32 pages

Social Preferences

part VI|76 pages


chapter 16|24 pages

Belief Anomalies

chapter 17|27 pages

Nonstandard Beliefs

part VII|70 pages

Decision Processes

chapter 19|19 pages

Mental Accounting

chapter 20|23 pages