Introductory description

EC345-15 Behavioural Economics: Theory and Applications

Module web page

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

The syllabus will cover both theory and application of Behavioural Economics. It will typically include topics such as:

Theory

1. Prospect Theory - Effect of reference dependent preferences, loss aversion (sometimes called the endowment effect), present bias and social preferences, in the labour, financial and other markets.
2. The relationship between choice utility and subjective well-being
3. Economics of Happiness

Applications

1. Addiction - Review the standard rational model of addiction (Becker & Murphy). Effect of time-inconsistency on consumption, internalities and multiple-selves. Illustration of policy interventions and the implications for the setting of taxes on commodities such as alcohol and tobacco.
2. Dishonesty - from incentive compatibility where truth telling is induced to dishonesty as an empirical regularity (focus on the work by Dan Ariely) Also report on experiments involving incorrect bills in restaurants - do diners react by notifying the waiter if the mistake is in their favour?
3. Implications for policy - with reference to competition and consumer policies we shall look at the idea of Nudge based policies and contrast these with traditional incentive market-based policies.

The course will have an emphasis on the empirical identification of the different models, but it does not require an advanced econometric knowledge.

Learning outcomes

By the end of the module, students should be able to:

• Key Skills:...demonstrate knowledge of laboratory and field experimentation. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, seminars, independent study and reading. The summative assessment methods that measure the achievement of this learning outcome are: Examination.
• Subject knowledge and understanding:...understand the rationale for the study of behavioural economics and to be able to describe the key theoretical and empirical tools of modern behavioural economics. Present a good understanding of economic behaviour involving agents. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, seminars, independent study and reading. The summative assessment methods that measure the achievement of this learning outcome are: Examination.
• Subject knowledge and understanding:...develop plausible models of behaviour that cannot be explained by the standard economic rational agent-based theories. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, seminars, independent study and reading. The summative assessment methods that measure the achievement of this learning outcome are: Examination.
• Key Skills:...communicate an understanding of behavioural economics using appropriate methodologies. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, seminars, independent study and reading. The summative assessment methods that measure the achievement of this learning outcome are: Examination.
• Professional skills:...understand contemporary economic models founded on behavioural economics and increasingly used by practitioners in a variety of fields from government to companies. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, seminars, independent study and reading. The summative assessment methods that measure the achievement of this learning outcome are: Examination.

Indicative reading list

Please see Talis Aspire link for most up to date list.

View reading list on Talis Aspire

Subject specific skills

Students will have the opportunity to develop skills in:
Analytical thinking and communication
Analytical reasoning
Critical thinking
Strategic thinking
Problem-solving
Abstraction
Policy evaluation
Analysis of incentives
Analysis of optimisation
Understanding of Uncertainty and Incomplete Information

Transferable skills

Students will have the opportunity to develop:
Numeracy and quantitative skills
Written communication skills
Oral communication skills
Mathematical, statistical and data-based research skills