Markets and Economic Behavior

The purpose of this Seminar in Markets and Economic Behavior was to be able to observe a certain action and then figure out an explanation for that action from an economists’ viewpoint. The overarching goal was to increase ones understanding of markets and individual economic behavior by examining the different types of evidences available. By focusing on the observed evidence, we, as future managers, would have a higher amount of more accurate information to base our decisions on, allowing us to make more useful conclusions and more profitable decisions.

Taken from the first lecture, some key issues that have an effect on decision making include the level of market efficiency (economic profits are profits in excess of normal return due to competition), information aggregation by market participants (two heads are better than one), the development of trust, reciprocity and reputation though information gathering, the capability to use observed evidence to predict the market future, and the ability to understand “irrational” economic behavior. The more evidence you have about an event and the more you understand the reasons for that evidence, the more likely your conclusions and decisions will have positive results.

The issue of the development of trust, reciprocity and reputation and their effect on decision making can be seen in guest speaker John Dickhaut’s paper “Recordkeeping alters economic history by promoting reciprocity”. This paper was, for me, the most interesting out of all of the required readings because of the relationships that were formed between the parties and the more positive results that occurred with the development of trust and reciprocity. In the experiment mentioned in the paper, one person in a pair would receive 10 lira (a form of money) to start with and have the option to send any amount of it to their partner. The money sent to their partner would then be tripled and their partner would have the option of sending any...