ØASØK4400 Behavioral Economics Course description

Behavioral economics uses empirical insights from psychology and other fields (such as sociology or neuroscience) in economic analysis. Conventionally, economics assumes that people are "economically rational": they make logically consistent choices in their best self-interest. Of course, sometimes people don't behave that way. Behavioral economics broadens the reach of economic analysis to situations in which people unselfishly contribute to the common good (like giving to the Red Cross), regret a choice (such as eating a candy bar instead of an apple), or make errors in judgement (for example, assign too much weight to highly unlikely events such as a lightning strike). Economic policies can look very different when people exhibit these kinds of behavior.

None.

After completing the course, students will acquired the learning outcomes defined in knowledge, skills and general competence:

Knowledge

Students have specialized insight into:

• How people's decision making processes can fail to match economically rational predictions: context dependence and heuristics leading to systematic biases (for example framing effects, reference dependence and loss aversion)

• How behavioral models of people's uncertainty preferences can match some observed behavior (for example certainty effects, Allais paradox, Rabin's paradox) better than expected utility theory (for example prospect theory, disappointment and regret aversion)

• How behavioral models of people's time preferences can match some observed behavior (for example demand for commitment devices, self-control issues) better than discounted utility theory (for example quasi-hyperbolic discounting, habit formation)

• How behavioral models of people's social preferences can match some observed behavior (for example charitable giving, voluntary adherence to social distancing at high personal cost) better than the standard assumption of pure self-interest (for example inequality aversion, reciprocity, social norms).

Skills

The students can:

• Create and analyze empirical evidence, often from experiments and games, for behavior that does not adhere to "economic rationality".

• Model behavioral preferences and decision processes to analyze economic decision making.

• Critically assess the limitations of behavioral economics, for example excessive paternalism or the lack of a clear welfare criterion.

Lectures with active student participation.

In order to be able to register for the exam, the student must have the following approved work requirements:

Three written assignments, individually or in groups. The scope of the assignment (number of pages) varies depending on the nature of the assignment. 

If the assignments are not approved, the student will be given one opportunity to submit a new or improved version. The lecturer will provide more detailed information about deadlines for submission.

Written school exam (4 hours).

One dictionary (Native language-English/English-native language or English-English).

Calculator (as specified in regulations for use of calculator).

Letter grading A-F.

An internal and an external examiner will grade the exam.

A selection of at least 25% of the exam papers will be assessed by two examiners. The grades awarded to exam papers assessed by the external and internal examiner will be used to determine the level of all exam papers.