This note develops a behavioral explanation for the existence of an asymmetric tax treatment of gains and losses when investors are loss averse. We find that loss offset rules should be more restrictive for investors which are (1) more risk averse in case of gains, (2) less risk seeking in case...

We merge a financial market model with leverage-constrained, heterogeneous agents with a reduced-form version of the New-Keynesian standard model. Agents in both submodels are assumed to be boundedly rational. The fi nancial market model produces endogenously arising boom-bust cycles. It is also...

The economic models that prescribe Pigovian taxation as the first-best means of reducing energy-related externalities and argue that taxes are superior to energy efficiency standards are typically based on the neoclassical model of rational consumer choice. Yet, observed consumer behavior with...

The paper critically discusses the issue of rationality and choices in economics in both the behavioural and evolutionary approaches. Our study aims, on the one hand, to highlight the scientific contributions of psychology in economics, since psychology, and with it the theoretical approach of...

We add some elements of prospect theory to an analytically tractable version of Lucas’s “islands†model and show that the inclusion of reference dependence, declining sensitivity and loss aversion into the agents’ utility function leads to three main results. First, the...

This paper indicates that Keynes's General Theory provided many examples of actual behavior that differed from that predicted by classical theoryâthe mainstream economics of Keynes's time. This behavior included herd behavior in financial markets, the use of conventions, decisions made under...

In recent decades, there has been a growth in economic research programs loosely described as behavioral economics. Despite calls for closer engagement between behavioral and Post Keynesian economics, the impact of behavioral economics on the Post Keynesian literature remains relatively limited....

The paper "Can Post Keynesians Make Better Use of Behavioral Economics?" argues that "there is scope for a successful engagement between behavioral economics and Post Keynesian economics if it is based on explicitly stated common ground defined in terms of methodology." That argument limits the...

According to recent dual-process theories, interpersonal trust is influenced by both impulsive and deliberative processes. The present research explores the determinants of deliberative trust, investigating how trust decisions are affected by the availability of cognitive resources. We test the...