This course provides an overview of behavioral economics, which is a young, but rapidly growing field in economics. Behavioral economics extends the narrow view of completely rational and selfish agents (homo oeconomicus) by more realistic assumptions about human motivations and preferences. Such extensions are frequently inspired by empirical findings in the neighboring disciplines of psychology and sociology but also by experimental economics methods. They include social concerns, moral motivations, emotions or limits to cognitive ability.
Based on these concepts, the goal of behavioral economics is to gain new theoretical insights, predict and explore the ramifications on human behavior, strategic interaction as well as economic outcomes. Moreover, behavioral economics can inspire market design and welfare improving policies.
In the first part of the course, students will become familiar with the empirical and experimental evidence on systematic deviations of human behavior from the predictions of standard microeconomic models. Then, we will focus on how behavioral theory is built upon this evidence to arrive at descriptively more accurate models of human behavior.
In the second part of the course, we will study several applications, for instance in the area of financial and labor markets, and further advancements of behavioral economic theory. Students will pick a paper from the rich behavioral economics literature, present and critically reflect on it in class. Based on these presentations, we will discuss how descriptively accurate assumptions are necessary for economic analysis.
Main topics that we will cover are:
1. Behavioral decision theory
2. Intertemporal choice, self-control and sustainable decisions
3. Behavioral game theory
5. Social preferences
Topics may be subject to change due to students’ special interest. This course is suitable for Master students only and held in English.
We will mainly rely on journal papers that are announced during the course. However, there are two textbooks that might be of interest:
Angnar, E. (2012). A course in behavioral economics. Palgrave-McMillan.
Wilkinson, N. & Klaes, M. (2012). An introduction to behavioral economics. Palgrave-McMillan.
Further general literature:
Camerer, C., Loewenstein, G., Rabin, M. (2004). Advances in Behavioral Economics. Princeton University Press.
Camerer, C. (2003). Behavioral Game Theory: Experiments in Strategic Interaction. Princeton University Press.
Smith, V. & Plott, C. (2008): Handbook of Experimental Economics Results. North-Holland.
Click here to activate a link to the available reference books in the university library.