Behavioural Economics

School of Business and Economics

Behavioural Economics

Full course description

The traditional model of the homo economicus is ubiquitous in microeconomic theory. Economic agents are assumed to be rational utility maximisers with self-regarding preferences and unlimited processing capacities. Common sense and the results of economic experiments show that this is not always the case. Often people behave differently than predicted by theory. In this course, we will deal with the following problem statements:
1) When does microeconomic theory apply and when does it lose its predictive power?
2) If it does not apply, what concepts and models can be use to either extend or to substitute the current theory in order to describe human behaviour?

Specifically, we will discuss the following issues:
· Non-expected utility theory
· Intertemporal choice
· Social preferences
· Reciprocity
· Levels of analytical reasoning
· The role of mistakes

In addition, we will touch on the following topics:
· Mental accounting
· Heuristics
· Neuroeconomics

Course objectives

The goal of the course is to provide the students with the necessary sensitivity when applying theoretical models. After the course students should be able to identify the most important reasons why humans deviate from behaviour predicted by the commonly used model of the homo oeconomicus. Moreover they should be able to understand formal modelling of deviant behaviour.

Prerequisites

Microeconomics
· Ability to think analytically
· Basic game theory is not necessary but helpful: simple equilibrium concepts such as (pure and mixed strategy) Nash equilibrium and subgame perfect Nash equilibrium.
· Exchange students need to major in Economics

an advanced level of English

Behavioural Economics