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.

Language of instruction is English.

None

After completing the course, the student should have the following overall learning outcomes defined in terms of knowledge, skills and general competence:

Knowledge

The student has 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 student 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

General competence

The student is more able to

• use English as the professional language of Economics
• understand Economics as a science, and its strengths and weaknesses
• understand and apply economic methods, such as analytic modelling and economic experiments

Lectures with active student participation.

The following coursework requirements must have been approved in order for the student to take the exam:

• Coursework 1: Written assignment. Group work. Maximum 5 pages.
• Coursework 2: Written assignment. Group or individual work. Maximum 5 pages.
• Coursework 3: Written assignment. Individual work. Maximum 5 pages.

The group work will be carried out in groups consisting of 2-5 students, depending on the number of participating students in the course.

The coursework is part of the active learning experience for the students and helps prepare students for the final exam. It also serves as useful feedback about the effectiveness of the lecturer's teaching.

All required coursework must be completed and approved by the given deadline in order for the student to take the exam. If one or more coursework requirements have not been approved, the student will be given one opportunity to submit an improved version by the given deadline.

The exam in the course is a supervised exam of 4 hours.

The following aids are permitted:

• One dictionary (Native language-English/English-native language or English-English).
• Calculator (see regulations for the use of calculators in the programme description)

Grade scale A-F

The exam papers are assessed by one internal and one external examiner.

At least 25% of the exam papers will be assessed by two examiners. The grades awarded for the papers assessed by two examiners form the basis for determining the level for all the exam papers.

Svenn Jensen