Behavioural economic methods

This chapter describes how psychological concepts and measurements have been applied in behavioural economics and integrated into economic models. It starts introducing anomalies, indicating violation of standard economic assumptions, such as unstable preferences, intransitive preferences and preference reversals. Also, different types of utility are distinguished, i.e., predicted, experienced and remembered utility. The chapter continues describing direct measurements of key behavioural economic concepts and their behavioural correlates, including loss aversion, risk and time preference, social preference and well-being. Finally, several examples of the integration of these measures in economic models are considered.