Quasi Rational Economics

Library of Congress Cataloging-in-Publication Data

Thaler, Richard H., 1945-

Quasi rational economics / Richard H. Thaler.

p. cm.

Includes bibliographical references and index. ISBN 0-87154-846-1 ISBN 0-87154-847-X (pbk.) 1. Economics. I. Title. HB171.T47 1991 91-9797 330—dc20

First Paperback Edition 1994

Copyright © 1991 by Russell Sage Foundation. All rights reserved. Printed in the United States c America. No part of this publication may be reproduced, stored in a retrieval system, c transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, ( otherwise, without the prior written permission of the publisher.

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Introduction xi

Part One MENTAL ACCOUNTING AND CONSUMER CHOICE

1 Toward A Positive Theory of Consumer Choice 3

2 Mental Accounting and Consumer Choice 25

3 Gambling with the House Money and Trying

to Break Even: The Effects of Prior Outcomes

on Risky Choice (with Eric J. Johnson) 48

Part Two SELF-CONTROL AND INTERTEMPORAL CHOICE

4 An Economic Theory of Self-Control (with

Hersh M. Shefrin) 77

5 The Behavioral Life-Cycle Hypothesis (with

Hersh M. Shefrin) 91

6 Some Empirical Evidence on Dynamic

Inconsistency 127

ix

X Contents__________________________________________________________

7 The Psychology of Choice and the Assumptions

of Economics 137

Jack L. Knetsch) 167

9 The Psychology and Economics Conference

Handbook 189

Part Four FAIRNESS

Daniel Kahneman and Jack L. Knetsch) 199

11 Fairness and the Assumptions of Economics

(with Daniel Kahneman and Jack L. Knetsch) 220

Part Five FINANCIAL MARKETS

12 The Relevance of Quasi Rationality in

Competitive Markets (with Thomas Russell) 239

13 Does the Stock Market Overreact? (with

Werner F.M. De Bondt) 258

Werner F.M. De Bondt) 274

15 Do Security Analysts Overreact? (with

Werner F.M. De Bondt) 301

16 Investor Sentiment and the Closed-end Fund Puzzle

(with Charles M.C. Lee and Andrei Shleifer) 310

Index 353