30261 - EXPERIMENTAL ECONOMICS AND PSYCHOLOGY
CLEAM - CLEF - CLEACC - CLES-BESS - WBB - BIEF - BIEM
Course taught in English
Go to class group/s: 31
The goal is to introduce students to the exciting world of experimental & behavioral economics, including relevant methods (e.g. game theory, experiments, non-parametric statistics). Economists often use advanced mathematical methods, but rely on relatively simplistic assumptions about human nature. Research in neighboring social sciences, by contrast, typically uses less sophisticated analytical methods while entertaining a richer description of man. Behavioral economics combines the strength of both approaches, incorporating psychological insights into economic analysis with continued use of formal analytical tools. Lab experiments provide a means to gauge the empirical relevance of the resulting models.
- Principals of experimental design: identifying causal effects. Identifying causal mechanisms underlying casual effects and ruling out alternative explanations (construct identification).
- Elementary Rational Choice Theory and its implications for theory testin.
- Vernon Smith’s principles of experimentation in economics: what is an economically-relevant behavioral phenomenon.
- Quick review of the classical models of risk and time preferences.
- A little bit of of psychology. Relativity, sensitivity to framing, and loss aversion. Heuristics & habits as they relate to ignorance, limited experience and bounded rationality.
- Applications of insights from pscychology to economic choice under certainty: mental accounting, opportunity cost neglect, sunk cost fallacy, endowment effect, anchoring-and-adjustment, menu effects.
- Applications of insights from pscychology to judgment under uncertainty: Gambler’s & Hot Hand fallacies, Base Rate Neglect, Conjunction Fallacy.
- Applications of insights from pscychology to economic choice under uncertainty: the heuristics and biases of prospect theory.
- Social Preferences their implications for individual and strategic behavior: fairness, blame.
Students are assessed based on the performance on a team project as well as on a final exam. The team evaluation is collective but also factors in an individual evaluation-by-peers to help assess how well a student has contributed to team work.
The final grade is based on:
- two team projects (40%)
- objective assessments including quizzes and a final exam (60%)
- E. ANGNER, A Course in Behavioral Economics, Palgrave Macmillan, 2012.
Key theoretical notions will be covered in class and reflected in problem sets. Regular attendance and diligent work on problem sets will likely be critical for efficient learning and good performance on the exam.