| Economics & Psychology
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| Instructor: Kfir Eliaz,
Kfir_Eliaz@Brown.Edu,
401-832-2112, Robinson Hall 102A Office Hours: Wednesday, 1:30-2:30 Teaching Assistant:
James Campbell,
James_D_Campbell@brown.edu Description |
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| This course will explore the various ways in which economic theorists have tried to enrich the classical models in economics (with a focus on microeconomics) in light of growing evidence on systematic violations of the assumptions made in these models. Thus, we will mainly be studying formal models in economics, where the "psychology" part of the course will play a role as the motivation for the design of these models. | |
| Administrative details | |
| Assignments: There will be a homework assignment
following each of the topics. The plan is to cover nine topics (see
below), but this may change depending on the pace of the class. Each
homework assignment will count as 10% of the final grade, while the
remaining percentage will be allocated between participating in the online
experiments and the
final exam. Homework assignments will be posted online (on my Brown
homepage,
http://www.econ.brown.edu/fac/Kfir_Eliaz/EconPsychUnderGrad.htm), as
well as their due date, and it is the responsibility of the student to
obtain this information (I will not announce in class when homework is
due). Prerequisites: I will assume basic knowledge of calculus and probability. The vast majority of the material will consist of proving theorems and propositions. I have tried my best to use only elementary arguments and to keep the use of calculus and probability theory to a minimum. I have also tried to define basic concepts from scratch so that prior knowledge of intermediate microeconomics and game theory is helpful but not necessary. |
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| Topics | |
| There are many topics that lie at the intersection of
Economics and Psychology. Naturally, this course will cover only a few of
them with a focus on theoretical models (and some experimental work) at
the individual decision-making level. The few applications that will be
discussed will focus on consumer behavior and how firms may try to exploit
systematic biases that consumers may exhibit. Unfortunately, there is no textbook that covers the topics we will study in class. To compensate for this, I will post the slides that I will use in class, as well as lecture notes prepared by a colleague for a similar course (courtesy of Prof. Ran Spiegler from University College London). In addition, all the original papers that will either be discussed in class, or that you will be asked to read for homework, will be accessible via my homepage. Below is the list of planned topics. This list is tentative in the sense that we may not have time to cover all of these, or we may have to add a topic if our pace turns out to be rather quick. After each topic I have listed the relevant papers with a link to a pdf file. Online experiments: Before we begin with the topics, you are asked to visit the URL: http://gametheory.tau.ac.il/student/ and use the following: Course Number: [1590] Email: (your e-mail) Class Password: [9459]
I. Introduction (slides) 1. Rational choice and Independence of Irrelevant Alternatives (IIA) - Sheena S. Iyengar and Mark Lepper (2000): "When
Choice is Demotivating: Can One Desire Too Much of a Good Thing?"
Journal of Personality and Social Psychology 79, 995-1006. III. Rationalizing Irrational Choice (slides) Online experiments: problem set 1 - Gil Kalai, Ariel Rubinstein and Ran Spiegler, "Rationalizing
Choice Functions by Multiple Rationales" (2002), Econometrica
70 (6), 2481-2488 IV. Neuroeconomics (slides, paper) V. Dynamically Inconsistent Preferences (slides, notes from Ran Spiegler's book) 1. Experimental evidence on time inconsistency 2. The multi-selves approach 3. Examples 4. Contracting with dynamically inconsistent consumers 5. Special lecture by Pedro Dal Bo: VI.
Modeling Self Control
(slides) 1. Modeling self-control via preferences over
decision-paths 2. Applications 2.2. The impact of self-control preferences on Market
Competition VII. Behavioral Game Theory 1. Brief review of game theory
(slides) - Kfir Eliaz and Ariel Rubinstein, "Edgar Allan Poe's Riddle: Do Guessers Outperform Misleaders in a Repeated Matching Pennies Game?" Working Paper, 2008 VIII. Biased beliefs Special lecture by Yona Rubinstein on his joint paper with Gary Becker, "Fear and the Response to Terrorism" VIII. Choice under risk and uncertainty (slides) Online experiments: problem set 2 References
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| Homework Assignments | |
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Homework 1 (Due:
2/18/09) - Solution Additional readings for homework: John T. Gourville and Dilip Soman (2007): "Extremeness Seeking: When and Why consumers Prefer the Extremes", Working Paper, Harvard Business School. Homework 2 (Due: 4/1/09) - Solution Homework 3 (Due: 4/15/09) - Solution Homework 4 (Due: 4/22/09) - Solution Final Exam - Solution |
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