Economic Psychology

ROB RANYARD is a freelance researcher and Visiting Professor affiliated to the Centre for Decision Research, University of Leeds, UK. He is the editor of A Handbook of Process Tracing Methods for Decision Research (2011) and has publishing articles in journals including The Journal of Economic Psychology. He is a well-known figure in the field, previously serving as treasurer of the International Association for Research in Economic Psychology (IAREP) and currently being the IAREP country representative for the UK.

• Preface xvNotes on Contributors xviiAcknowledgements xxviiPART 1 Fundamentals 1Chapter 1 Introduction to Economic Psychology: The Science of Economic Mental Life and Behaviour 3Rob Ranyard and Vera Rita de Mello Ferreira1.1 Introduction 41.2 The emergence of the discipline 51.3 Research methods 101.4 Economic mental representations 111.5 Financial behaviour and economic activity 121.6 Life-span perspectives 131.7 Economic psychology and society 141.8 Summary 16Note 16Review questions 16References 16Further reading 18Chapter 2 Theories of Economic Decision-Making: Value, Risk and Affect 19Anton Kühberger and Michael Schulte-Mecklenbeck2.1 Introduction 202.2 Value and utility 202.3 Risk and uncertainty 222.4 Developments based on Subjectively Expected Utility (SEU) 232.5 B eyond Utility-Based Theories 252.6 Hot Decisions 272.7 Summary 31Review Questions 31References 31Further Reading 34Chapter 3 Future-Oriented Decisions: Intertemporal Choice 35Daniel Read and Marc Scholten3.1 Introduction 363.2 Rational Intertemporal Choice 363.3 A nomalies in Intertemporal Choice 383.4 E xplaining Anomalies 413.5 Framing Effects 423.6 What Do We Care About When We Measure Intertemporal Choice? 443.7 Summary 45Notes 46Review Questions 46References 47Further Reading 50Part 2 Research Methods 51Chapter 4 Research Methods for Economic Psychology 53Gerrit Antonides4.1 Introduction 544.2 Q ualitative Methods 554.3 Q uantitative Methods 584.4 Conclusion 634.5 Summary 64Review Questions 64References 64Further Reading 68Chapter 5 Assessing Psychological Dispositions and States that Can Influence Economic Behaviour 69Simon McNair and W. Ray Crozier5.1 Introduction 705.2 Psychological Dispositions and Economic Behaviour 715.3 Psychological States and Economic Behaviour 765.4 Methodological Issues in Assessing Dispositions and States 815.5 Summary 82Notes 83Review Questions 83References 83Further Reading 87Chapter 6 Developing, Evaluating, and Using Subjective Scales of Personality, Preferences, and Well-Being: A Guide to Psychometrics for Psychologists and Economists 88Alex M. Wood and Christopher J. Boyce6.1 Introduction 896.2 The Importance of Psychometrics for EconomicPsychology Research 896.3 S teps in Developing a Scale 916.4 Other Steps and Conclusion 1006.5 Summary 100Note 100Review Questions 101References 101Further Reading 103Part 3 E conomic Mental Representations 105Chapter 7 The Psychological Meaning of Money 107Tomasz Zaleskiewicz, Agata Gasiorowska and Kathleen D. Vohs7.1 Introduction 1087.2 Money: Economic and Psychological Perspectives 1087.3 Predictions 1097.4 The Method of Money Priming: Akin to Getting a Taste of Big Money 1117.5 Results 1127.6 Summary 118Acknowledgements 118Review questions 118References 119Further Reading 121Chapter 8 Mental Accounting and Economic Behaviour 123Gerrit Antonides and Rob Ranyard8.1 Introduction 1248.2 B road Mental Accounts 1248.3 Mental Accounts for Specific Financial Decisions 1268.4 Other Categorizations of Money 1278.5 Functions of Mental Accounts 1298.6 D eterminants of Mental Accounting 1338.7 Conclusion 1348.8 Summary 135Review Questions 135References 136Further Reading 138Chapter 9 How Laypeople Understand the Economy 139David Leiser and Zeev Krill9.1 Introduction: Understanding Economics Is Hard Yet Expected 1409.2 Interacting Variables 1439.3 U sing Metaphors 1479.4 Financial Literacy 1499.5 Summary 150Review Questions 151References 151Further Reading 154Chapter 10 The Citizen’s Judgements of Prices and Inflation 155Rob Ranyard, Fabio Del Missier, Nicolao Bonini and Davide Pietroni10.1 Introduction 15610.2 Price Evaluation 15610.3 Inflation 16110.4 Policy Implications 16510.5 Summary 166Notes 166Review Questions 167References 167Further Reading 170Chapter 11 Materialism and the Meanings of Possessions 171W. Ray Crozier11.1 Introduction: The Socio-Economic Context of Possessions and Materialism 17211.2 The Psychological Meanings of Possessions 17311.3 Psychological Aspects of Materialism 17611.4 Materialism and Subjective Well-Being 17811.5 Summary 182Notes 183Review Questions 183References 183Further Reading 185Part 4 Financial Behaviour 187Chapter 12 Defining and Influencing Financial Capability 189Ivo Vlaev and Antony Elliott12.1 Introduction 19012.2 A New Conceptualization of Financial Capability 19012.3 Ways to Influence Financial Capability 19612.4 Conclusion 20212.5 Summary 202Notes 202Review Questions 203References 203Further Reading 205Chapter 13 Saving Behaviour: Economic and Psychological Approaches 206Ellen K. Nyhus13.1 Introduction 20713.2 E conomic Perspectives 20913.3 Psychological Approaches 21113.4 Summary 217Review Questions 218References 218Further Reading 221Chapter 14 The Psychology of Borrowing and Over-Indebtedness 222Rob Ranyard, Sandie McHugh and Simon McNair14.1 Introduction 22314.2 D eterminants of Borrowing 22414.3 Credit Choice Processes 22514.4 Repayment Strategies 22814.5 Routes to Over-Indebtedness 22914.6 Psychological Consequences of Debt 23014.7 Policy Implications 23114.8 Summary 233Review Questions 234References 234Further Reading 238Chapter 15 Behaviour in Financial Markets 239Martin Hedesström15.1 Introduction 24015.2 D o Stocks Always Trade at the ‘Right’ Price? 24015.3 Cognitive Influences on Investor Behaviour 24215.4 E motional Influences 24615.5 S ocial Influences 24815.6 Policy Implications 25015.7 Summary 250Review Questions 250References 251Further Reading 254Chapter 16 Tax Behaviour 255Erich Kirchler and Erik Hoelzl16.1 Introduction 25616.2 Taxes and Tax Compliance 25616.3 Tax Attitudes by Individual Taxpayers 25816.4 Profit Shifting and Aggressive Tax Planning by Companies 26016.5 Regulation Strategies by Tax Authorities 26116.6 Interaction Climates Between Taxpayers and Tax Authorities 26416.7 Practical Implications 26716.8 Summary 268Review Questions 268References 268Further Reading 271PART 5 E conomic Activity 273Chapter 17 Volunteer Organizations: Motivating with Awards 275Bruno S. Frey and Jana Gallus17.1 Introduction 27617.2 Organizational Forms 27617.3 A wards as Motivation 27917.4 Conditions for Successfully Giving Awards to Volunteers 28217.5 E ffects Of Awards on Performance 28417.6 Summary 285Review Questions 285References 285Further Reading 286Chapter 18 Entrepreneurial Activity 287Artur Domurat and Tadeusz Tyszka18.1 Introduction 28818.2 E nvironmental Factors and Entrepreneurship 28918.3 Reasons for Engaging in Entrepreneurial Activity 29018.4 Personality Characteristics of Entrepreneurs 29218.5 Psychological Traps in Entrepreneurship 29618.6 Teaching Entrepreneurship 29718.7 Summary 299Review Questions 300References 300Further Reading 303Chapter 19 The Economic Psychology of Gambling 304Juemin Xu and Nigel Harvey19.1 Introduction 30519.2 Lotteries 30519.3 S cratch Cards 30719.4 Roulette 30719.5 Fruit Machines 30919.6 S ports Betting 30919.7 Card Games 31119.8 Problem Gambling 31219.9 Summary 314Review Questions 314References 314Further Reading 318PART 6 Life-Span Perspectives 319Chapter 20 Economic Socialization: Childhood, Adolescence, and Early Adulthood 321Annette Otto and Joyce Serido20.1 Introduction 32220.2 A Contextual Framework for Economic Behaviour Development 32220.3 The Role of Parents in Economic Socialization 32520.4 The Study of Economic Behaviour Development From Childhood Through Early Adulthood 32720.5 Summary 331Review Questions 331References 331Further Reading 336Chapter 21 Childhood Psychological Predictors of Lifelong Economic Outcomes 337Mark Egan, Michael Daly, and Liam Delaney21.1 Introduction 33821.2 Literature Review 33821.3 Lifecourse Perspective 34421.4 Methodological Challenges 34621.5 Policy Implications 34821.6 Conclusion 34921.7 Summary 349Notes 350Review Questions 350References 350Further Reading 353Chapter 22 The Economic Psychology of Financial Decision-Making and Money Management in the Household 354Stefanie J. Sonnenberg22.1 Introduction 35522.2 Financial Decision-Making in the Household 35622.3 Household Money Management 36122.4 Conclusion 36622.5 Summary 367Notes 368Review Questions 368References 368Further Reading 370Chapter 23 Ageing and Economic Decision-Making 371Wändi Bruine De Bruin23.1 Introduction 37223.2 The Role of Cognitive Deliberation in Decision Making 37223.3 The Role of Experience-Based Knowledge in Decision-Making 37323.4 The Role of Emotions in Decision-Making 37423.5 The Role of Motivation and Strategies in Decision-Making 37523.6 Interventions 37623.7 D irections for Future Research 37823.8 Summary 380Acknowledgements 380Review Questions 381References 381Further Reading 386Part 7 Economic Psychology and Society 387Chapter 24 Psychological Determinants of Charitable Giving 389Tehila Kogut and Ilana Ritov24.1 Introduction 39024.2 D onation Decisions: Costs and Rewards 39024.3 Causes that Elicit More Help 39124.4 S pecific Individuals in Need 39324.5 E ffectiveness and Impact 39524.6 Who Helps – and When? 39624.7 Main Research Methods in the Study of Charitable Giving 39824.8 Future Research Directions 39924.9 Summary 400Review Questions 400References 400Further Reading 404Chapter 25 Life Satisfaction and Emotional Well-Being: Psychological, Economic and Social Factors 405Tommy Gärling and Amelie Gamble25.1 Introduction 40625.2 Views of Well-Being in Economics and Psychology 40625.3 Measurement of Subjective Well-Being 40725.4 Factors Influencing Subjective Well-Being 40925.5 Consequences of Subjective Well-Being 41525.6 Summary 417Review Questions 417References 417Further Reading 420Chapter 26 Living in Poverty: Understanding the Financial Behaviour of Vulnerable Groups 421Cäzilia Loibl26.1 Introduction 42226.2 D efinition of Poverty 42226.3 Characteristics of Financial Behaviours 42326.4 Vulnerable Population Groups 42726.5 Policy Implications 43126.6 Summary 431Review Questions 431References 432Further Reading 434Chapter 27 Economic Psychology and Pro-Environmental Behaviour 435Michel Handgraaf, Anouk Griffioen, Jan Willem Bolderdijkand John Thøgersen27.1 Introduction 43627.2 B ounded Rationality 43727.3 The Environment as a Social Dilemma 44127.4 Conclusion 44427.5 Summary 445Review Questions 446References 446Further Reading 450Chapter 28 Insurance Behaviour and Society 451Rob Ranyard, John K. Ashton and Bill Hebenton28.1 Introduction 45228.2 Insurance as Risk Protection 45228.3 Mis-Selling 45628.4 Insurance Fraud 45928.5 Summary 462Notes 463Review Questions 463References 463Further Reading 467Index 469