Answer to Question #107625 in Microeconomics for n

Question

I will venture a guess that you never expected to see the word neuroscience used in an economics course, yet here it is describing the tenants of behavioral economics. Richard Thaler has now won a Nobel Prize developing the theory on this new approach to economic decision making. What he does is to join the tenants of economic rationality with psychology in decision making. Provide an example of your behavior which made sense to you but was perhaps not strictly rational in the economic sense.

Answer 1

Once I was helping my father who is an entreprenuer. My job was to get an order from a client and pass it to my father. One woman wanted to order a lot of our goods(candels). The thing is that she ordered, let's say 100 small candels whose price was $1 and 500 big candels whose price was $5. She wasn't purchasing that candels but was just placing them at her shop to sell, and after selling it she would pay us. I was happy that me and my father could earn a big sum of money so we accepted this order. After some time I understoode that it is not rational due to demand law(to sel a lot of expensive goods and little of cheap goods). But there was not a way back.

We delivered the whole order, and only a year after, she was able to pay us 2/3 of the sum of whole order, and the rest candels she gave us back.

So, this decision was not rational in the economic sense, but because of our profit desire and the thought that a client knows demand at her shop better, for me and my father it made sence.