Behavioral Economic Theory
The course starts on the first week of the semester. Time and location will be announced soon.
Description, Aims & Scopes
Behavioral Economics emerged out of a number of empirical and experimental puzzles which are difficult to explain with the standard economic paradigm. Why do default decisions matter even if transaction costs are low? Why do people borrow on credit cards and, at the same time, hold substantial illiquid wealth? Why do people engage in charitable giving? Behavioral economics is the attempt to shed light on these and other puzzles by enriching standard theory with psychological realism, i.e., creating models about behavior that bring more accurate predictions.
The aim of the course is to make students familiar with the most important workhorse models in behavioral economics. At the end of the course, students should be able to apply these workhorse models to particular economic problems in industrial organization, personal finance, health, and so on. This course has a strong focus on formal theoretical models, but we will also discuss empirical and experimental evidence.
All lecture materials will be provided via LSF. The course is decomposed into two parts. The first part of the course will be held as a lecture and will provide the foundations needed for the second part of the course. In these lectures, the topics/models will be introduced and the relevance of these models is discussed. The second part of the course will be held as a seminar. Each student is asked to write a term paper (“referee reports”) on two papers of your choice and to give a short presentation on one of these two papers at the final presentation.
Grading: Term paper (50%); Paper presentation and discussion (50%)
Students taking this class should have a basic knowledge of Microeconomic Theory and Game Theory.
- Rabin, M. (1998): "Psychology and Economics," Journal of Economic Literature, 36, 11-46
- DellaVigna, S. (2009): "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, 47, 315-372
- Bernheim, B.D., S. DellaVigna, and Laibson, D., eds. (2018): Handbook of Behavioral Economics - Foundations and Applications, Volume 1
- Bernheim, B.D., S. DellaVigna, and Laibson, D., eds. (2019): Handbook of Behavioral Economics - Foundations and Applications, Volume 2