Gregory J. Madden University of Wisconsin--Eau Claire
This chapter is designed to serve as an introduction to the major concepts, measures, and methods of behavioral economics. As such, the target audience is composed of readers who are relatively unfamiliar with behavioral economics. For this subset of readers, this chapter allows a better understanding of the remainder of the book. This chapter also is intended for those readers who are somewhat familiar with the behavioral economics literature but have yet to see the utility of the analyses. This chapter contains several examples illustrating the practical relevance of behavioral economics. This chapter glosses over the quantitative complexities of behavioral economics, focusing instead on an overview of some of the more important findings and concepts emanating from this literature. Readers with greater experience in behavioral economics or who are interested in the quantitative details of behavioral economics can safely proceed to Hursh (chap. 2, this volume), which examines these more advanced concepts.
This chapter begins with a brief history of the origin and development of behavioral economics within behavioral psychology (behavior analysis) and experimental economics. From these roots, we can begin to define the field of behavioral economics, recognizing its evolving status. In the sections that follow, two measures of consumer behavior frequently examined in behavioral economic experiments (consumption and spending) are outlined, followed by an overview of some of the important economic variables known to affect consumer behavior (price, alternative sources of reinforcement, discounting delayed consequences, and income). Throughout these sections,