Online Course Behavioral Economics
Peter P. Wakker
Erasmus University Rotterdam
- Topics: behavioral economics, its history, concepts, and theory based on empirical findings; less focus on empirics
- Nature: broad & concise; not deep;
alternative course, deep and focussing on risk/uncertainty, is
here
- Primary audience: master students in economics;
further: psychology, business, finance, health, math
- Textbook: given novelty, none. Slides, provided below and written for this purpose, serve as substitute
- Prerequisits: only basic knowledge of probability theory;
useful: microeconomics on individual choice & ability to read formulas; some game theory, but can be skipped if not interested
- Course load: 1.5 ECT credits
-
Short topics of independent interest
Given broadness, many topics can be studied on their own, independently of the rest. Those topics include: ordinal revolution in economics, Allais paradox, Ellsberg paradox, Arrow voting paradox, time inconsistency, preference reversals, emotions in game theory, prospect theory, Fehr-Schmidt inequality aversion, Kahneman’s experienced utility, happiness, WTP-WTA discrepancy.
Material used
Specification of material to be studied
The material to be studied is specified in detail below, organized as homework for three meetings. Exercises are in the file linked above.
Advice: try to solve exercises yourself before inspecting solutions. If you can't solve an exercise, don't look at solutions yet, but search in the theory to find your lack of knowledge. This searching is the most useful stage of learning.
1st meeting
Topics:
ordinal foundation of economics in 1930s; its first successes: behavioral foundations of preference, utility, expected utility, discounted utility, utilitarianism;
empirical problems; biases-heuristics
Material (homework for 2nd meeting):
study Chs. 1-3 of the powerpoint slides, linked above, and the
recordings for 1st meeting.
Exercises: 1.4.2, 1.4.4, 1.5.2, 1.6.1, 1.6.2, 1.7.1, 2.3.1, 2.4.1, and 2.5.1
Solutions to these exercises
2nd meeting
Topics:
most mathematical meeting; many behavioral theories for risk, time, and interpersonal
Material (homework for 3rd meeting):
study the powerpoint slides up to and including Ch. 5, and the
recordings for 2nd meeting.
Exercises: 3.2, 4.2.1, 4.2.2, 4.2.3, 4.3.1, 4.3.2, 4.5.3, 4.6.1, 5.4.1
Solutions to these exercises
3rd meeting
Topics:
welfare theories; behavioral theories applied to game theory, risky choices, discounting and self-control; framing, and more fundamental breakaways from revealed preference
Material (final homework:
study the powerpoint slides and
recordings for 3rd meeting.
Skip: §8.2 (Quantal response equilibrium). Also study the solution to Exercise 3.2.
Exercises: 4.5.1, 4.5.2, 5.2.1, 5.3.1, 5.3.2, 6.1.1, 8.1.1, 12.1.1
Solutions to these exercises