Behavioral Economics

Study Board of Market and Management Anthropology, Economics, Mathematics-Economics, Environmental and Resource Management

Teaching language: English
EKA: B560053142, B560053102
Censorship: Second examiner: None, Second examiner: Internal
Grading: Pass/Fail, 7-point grading scale
Offered in: Odense
Offered in: Autumn
Level: Master

Course ID: B560053101
ECTS value: 10

Date of Approval: 19-02-2019


Duration: 1 semester

Course ID

B560053101

Course Title

Behavioral Economics

Teaching language

English

ECTS value

10

Responsible study board

Study Board of Market and Management Anthropology, Economics, Mathematics-Economics, Environmental and Resource Management

Date of Approval

19-02-2019

Course Responsible

Name Email Department
Sibila Di Guida sidg@sam.sdu.dk

Offered in

Odense

Level

Master

Offered in

Autumn

Duration

1 semester

Mandatory prerequisites

None.

Recommended prerequisites

This course is available for both bachelor and master students.

Prerequisite for this course is a basic knowledge of microeconomics at the undergraduate level. More specifically, it is important that students have a good understanding of consumer demand. This can be achieved in the courses Microeconomics (course no. 9115501 / B540008101) or literature equivalent to: Perloff: Microeconomics. Pearson Addison Wesley, 7th edition or later.

Aim and purpose

Attention in behavioral economics has increased significantly in the last decades as a result of an increased effort in understanding and predicting human behavior and actions focusing both on the rational and human traits of persons’ behavior. In 2002, Daniel Kahneman and Vernon Smith, won the Nobel Prize in Economics for their contributions in the field of behavioral and experimental economics. Other recent Nobel Laureates researching within the field of behavioral economics include Alvin Roth (on market design) and Richard Thaler (on finance and mental accounting).

The purpose of the course is to introduce students to the vast field of behavioral economics. Behavioral Economics integrates economic theories and concepts with theories from the psychology literature, offering a unique vantage point to study human behavior. These theories and concepts are tested experimentally and theoretically.

The course will focus on individual’s quasi-rational behavior in decision making, by modifying the standard economic assumptions concerning rationality and decision making. Bounded rationality, limited willpower, and limited self-interest are three key areas in which human behavior and choices diverge from rational behavior in the economic sense. These are examples of core concepts that will be discussed during the course. The students in the course will be stimulated to think precisely (and often formally) about what is that specifically determines a given behavior or economic performance and how this could be tested. As a natural consequence, part of the work will be based on data and documentation such as results based on experiments and surveys.

In the course students will give presentations of both research papers and their own work. Students will work in small groups and be engaged in several inter and extra group activities. Finally, students will produce a term paper, where they will discuss and present their own project. The unique mix of in-class lectures and activities will provide students with knowledge on the topic, will teach them how to develop autonomously a research project, and will also help them to develop their presentation skills and teach them how to manage an audience competently.


Content

Rational choice and decision making

In an ideal world, defaults, frames, and price anchors would not impact on consumer choices. Individual decisions would be the result of a careful weighing of costs and benefits and informed by existing and stable preferences. While it is implicitly assumed in standard economic theory that consumers are able to treat all information in a completely rational way, it is now widely recognized that preferences are context dependent and that there are limits to how much information consumers can actually handle. To select between competing products in a potential situation of choice, consumers will often use different resolution strategies that differ from the fully rational individual – resulting in biases and heuristics in decision making. We will look at the assumptions underpinning the standard economic model, so as to identify the anomalies in consumer choice and decision-making processes.

Choice under risk and uncertainty

We will here focus on anomalies that violate the assumptions of standard economic theory under uncertainty and introduce alternative models that overcome some of the shortcomings of the standard expected utility model. Most notably this involves the development of the alternative theory know as prospect theory by Kahneman and Tversky (1972). Prospect theory is one of the most well-known phenomena in behavioral economics. The theory states that individuals have a tendency to be less willing to gamble with gains than with losses. This is known as “loss aversion” and implies that preferences are reference dependent. Another well-established theory that also will be covered in the course is the theory of Mental Accounting, which builds on prospect theory.


Behavioral Game Theory and social preferences

Another important topic in behavioral economics is how individuals interact with others in making decisions. Behavioral game theory analyses interactive strategic behaviour and decisions using methods of game theory and experimental economics. This involves laboratory experiments using simple games to study why individuals not always act rationally and following the utility maximizing rule. Experiments include testing deviations from economic theory such as fairness and altruistic preferences

Further topics

Other topics could be introduced in addition to the abovementioned topics, to fit the interests of the specific cohort of students (bounded rationality, learning models, other-regarding models, intertemporal choices).

Learning goals

After attending the course, the students must:

Description of outcome - Knowledge

Demonstrate knowledge on the course themes in such a way that the students are able to:

  • Describe concepts, theories, and methods in behavioral economics

Description of outcome - Skills

Demonstrate skills in such a way that the students are able to:

  • Select and apply relevant concepts, theories, and methods to specific behavioral problems
  • Suggest and reflect critically on suggested solutions/initiatives to deal with specific behavioral problems

Description of outcome - Competences

Demonstrate competencies in such a way that the students are able to:

  • Apply and assess theories and methods in a reflected manner and based on sound conceptual underpinnings from behavioral economics
  • Plan and perform analysis of selected behavioral case problems
  • Critically address own and other research, constructively criticizing and providing solutions to the observed issues

Literature

A list of the material will be published on BlackBoard at the beginning of the course.

Example:

Published research papers, textbook such as Wilkonson and Klaes. An Introduction to Behavioral Economics. Palgrave MacMillan. Latest version.


Teaching Method

The classes will be a combination of lectures and student activities. Students will give presentations of both research papers and their own work. Students will work in small groups and be engaged in several inter and extra group activities. Finally, students will produce a term paper, where they will discuss and present their own research project. 

Student Activity as part of the course:

  1. Presentation of own assignment
  2. Presentation of research papers
  3. Compulsory attendance
  4. Active participation at discussions and inter/extra group activities

Workload

Scheduled classes:

3 lectures weekly for 15 weeks.   

Workload: 

The students' total teaching load is expected to be divided as follows:

Lectures - 45 hours
Preparation for lectures - 90 hours
Project report - 90 hours
Preparation for exam - 44 hours
Exam - 1 hour
Total 270 hours

Examination regulations

Exam

Name

Exam

Timing

In-class participation (part 1)

Exam: During the semester
Reexam: February


Research project with oral examination (part 2)

Exam: January 
Reexam: February

Tests

In-class participation (part 1)

Name

In-class participation (part 1)

Form of examination

Participation

Censorship

Second examiner: None

Grading

Pass/Fail

Identification

Student Identification Card - Date of birth

Language

English

Duration

-

Assignment handover

The requirements to pass the participation are handed out in the first day of class.

ECTS value

1

Additional information

The participation will be assessed based on the following criteria:

- Class attendance, participation in class activities

- Peer feedback in class

- In class presentation of own research project

- In class presentation of papers

The specific requirements will be handed out in the first day of class.

Re-examination

Form of examination

Home assignment

Identification

Student Identification Card - Exam number

Duration

72 hours

Examination aids

All exam aids allowed.

Assignment handover

Course page in Blackboard.

Assignment handin

Via SDUassignment in the course page in Blackboard.

Additional information

The take home assignment will consist of a critical analysis of 2 projects produced by colleagues. The student is expected to be constructively critical, to analyze the projects from a behavioral economics perspective, and to describe in depth the pros and cons of the research projects, as well as suggest how the projects could be improved.

EKA

B560053142

Research project with oral examination (part 2)

Name

Research project with oral examination (part 2)

Form of examination

Home assignment with oral defense

Censorship

Second examiner: Internal

Grading

7-point grading scale

Identification

Student Identification Card - Date of birth

Language

English

Duration

Research project:

Date for submission will appear from the examination plan.

Oral exam:

20 minutes

Length

Research project:

10 pages (one student), 18 pages (2 students), 25 pages (3 students)

Research project will be individual projects or group projects depending on the number of students attending the course.

Examination aids

Research project:

All exam aids allowed.


Oral exam:
None.

Assignment handover

Course page in Blackboard.

Assignment handin

Via SDUassignment in the course page in Blackboard.

ECTS value

9

Additional information

The oral exam will be composed of two parts: First a discussion of the research project, then a randomly drawn question which will lead to a discussion of related topics. The list of the questions will be provided by the end of the course.

The research project must be handed in, in order to participate in the oral exam. 

The examination form at the reexam may change.

EKA

B560053102

External comment

NOTE - This course is identical with the former course 9110901 Behavioral Econiomics.
Used examination attempts in the former identical course will be transferred.
Courses that are identical with former courses that are passed according to applied rules cannot be retaken.

The student is automatically registered for the first examination attempt when the student is registered for a course or course element with which one or more examinations are associated. Withdrawal of registration is not possible, and students who fail to participate in an examination have used one examination attempt, unless the University has made an exemption due to special circumstances. 

Examination in this course is not allowed if the student has passed the bachelor's course Introduktion til adfærdsøkonomi (9852102).

Courses offered

Period Offer type Profile Programme Semester
Fall 2019 Optional BSc.oecon (Samfundsøkonomisk linje) BSc in Economics | Bachelor of Science in Economics | Odense
Fall 2019 Optional BSc.oecon (Erhvervsøkonomisk linje) BSc in Economics | Bachelor of Science in Economics | Odense
Fall 2019 Optional MA Negot 120 ECTS - International Market Relations Admitted 2019 Master of Arts (MA) in Business, Language and Culture | Odense
Fall 2019 Optional MA Negot 120 ECTS - International Relations Admitted 2019 Master of Arts (MA) in Business, Language and Culture | Odense
Fall 2019 Optional MA Negot 120 ECTS - International Communication Management Admitted 2019 Master of Arts (MA) in Business, Language and Culture | Odense
Fall 2019 Optional MA Negot 120 ECTS - Global Marketing Management Admitted 2019 Master of Arts (MA) in Business, Language and Culture | Odense
Fall 2019 Optional MA Negot 120 ECTS - Human Ressource Management Admitted 2019 Master of Arts (MA) in Business, Language and Culture | Odense
Fall 2019 Optional Master of Science in Economics (with possibility of specialization) MSc in Economics | Master of Science (MSc) in Economics | Odense
Fall 2019 Optional Master of Science in Economics (with profile in Finance) MSc in Economics | Master of Science (MSc) in Economics | Odense
Fall 2019 Exchange students

Teachers

Name Email Department City
Sibila Di Guida sidg@sam.sdu.dk Odense

URL for MySchedule

3
Monday
17-01-2022
Tuesday
18-01-2022
Wednesday
19-01-2022
Thursday
20-01-2022
Friday
21-01-2022
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