Free Lunches: Insights from Behavioral Economics

Standard economic theory assumes that all agents (consumers and organizations alike) are rational agents working effectively to maximize their own welfare. Since all actors in the marketplace are assumed to be at a state of maximized returns, it follows that there are no "free lunches". On the other hand, the emerging field of behavioral economics routinely demonstrates that individuals and organizations do not maximize their own welfare and instead follow suboptimal decision strategies and succumb to different decision traps. While this view of human rationality can be a bit depressing, it also implies that the marketplace is full of free lunches.

This session will provide an overview of behavioral economics by demonstrating some of the irrationalities of everyday life. These will include sensitivity to context, lack of knowledge of own preferences, the effects of complexity, the interplay between emotion and cognition, and the problem of self control. Some of the available free lunches should become evident.