Frontiers of Microeconomics Flashcards

This set of flashcards covers vocabulary and concepts from the lecture on Frontiers of Microeconomics at SNU Business School, including asymmetric information, behavioral economics, and systematic psychological biases.

Asymmetric Information

A study area focusing on how knowledge imbalances affect market transactions.

Political Economy

The use of economic tools to understand how government actually works.

Behavioral Economics

The integration of psychological insights to understand "real" human decision-making.

Agent

A person performing a task for another.

Principal

The person for whom a task is performed.

Moral Hazard

The tendency of an imperfectly monitored person (agent) to engage in dishonest or undesirable behavior.

Efficiency Wages

High wages paid above-market rates to increase the cost of job loss and encourage worker effort.

Adverse Selection

Occurs when one party knows more about the attributes of a good than the other, leading to a "bad selection" of items in the market.

The Lemons Problem

A situation in the used-car market where sellers know defects but buyers do not; fear of getting a "lemon" drives high-quality cars out of the market as buyers offer low prices.

Signaling

An action taken by an informed party to reveal private information to an uninformed party.

Screening

An action taken by an uninformed party to induce an informed party to reveal information.

Homo economicus

The concept of a perfectly rational human actor often assumed in standard economic models.

Overconfidence

A systematic mistake where people tend to believe they know more than they do.

Undue Salience

Giving too much weight to a few vivid observations rather than statistics.

Confirmation Bias

The reluctance to change one's mind and the tendency to only look for evidence that supports existing beliefs.

The Ultimatum Game

A classic experiment showing people care about fairness even to their own financial detriment, such as rejecting "unfair" offers of $1 out of $100.

Time Inconsistency

A behavior where people choose immediate gratification over better long-term outcomes, often manifested as procrastination.

Commitment Devices

Mechanisms, such as retirement plans with automatic deductions, that protect people from their own impulsiveness.