Handbook of Behavioral Industrial Organization
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Handbook of Behavioral Industrial Organization

Edited by Victor J. Tremblay, Elizabeth Schroeder and Carol Horton Tremblay

The Handbook of Behavioral Industrial Organization integrates behavioral economics into industrial organization. Chapters cover concepts such as relative thinking, salience, shrouded attributes, cognitive dissonance, motivated reasoning, confirmation bias, overconfidence, status quo bias, social cooperation and identity. Additional chapters consider industry issues, such as sports and gambling industries, neuroeconomic studies of brands and advertising, and behavioral antitrust law. The Handbook features a wide array of methods (literature surveys, experimental and econometric research, and theoretical modelling), facilitating accessibility to a wide audience.
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Chapter 9: Identity and the theory of the firm

Jeffrey V. Butler


The concept of identity is increasingly entering economists’ discourse on a wide range of topics. This chapter details the historical development of the theory of social identity outside of economics, touching on key economically relevant insights and results. It then describes how identity has been modeled by economists, outlining two key strands of the literature: a preference-based model of identity due to Akerlof and Kranton and a beliefs-based model developed by Bénabou and Tirole. Next, it describes one way in which identity can be applied to the field of industrial organization in particular: it may help to shed light on fundamental aspects of the classical theory of the firm. In the concluding section, opportunities for future research are highlighted.

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