Behavioral economics is an effort to incorporate ideas from psychology into economic models of behavior. We will focus on popular experimental anomalies, including the Allais and Rabin paradoxes, ultimatum bargaining, the centipede and public goods contribution games. We will examine the extent to which these are consistent with standard economic theory and how they may contradict it. The primary focus will be a critical examination of psychological theories of non-standard preferences including loss aversion, probability weighting, reciprocity, fairness and present bias. Theories of incorrect beliefs and systematic biases such as money illusion and procrastination will be covered. Applications to the current economic crisis will also be discussed. The class will include an introduction to experimental methods in economics, including hands-on experience in the MISSEL laboratory. A sound grounding in economic theory is essential to the course. You must have successfully completed Economics 4011, and should be acquainted with basic optimization theory, expected utility theory, risk aversion, discounting and basic game theory including dominance, Nash equilibrium and subgame perfection.. Prerequisite: Econ 4011 3 units.
Course Attributes: EN SAS SSCFA SSCAR SSC
Section 01Behavioral Economics and Experimental Economics
INSTRUCTOR: RogersView Course Listing