Behavioral Economics and Advanced Microeconomic Topics Essay

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Spring 2012 rutgers university

online @ sakai

Advanced Microeconomic Topics:
Behavioral Economics
01:220:430

Logistics
• Lecture: m/w 1.10–2.30pm, FH A6 http://rumaps.rutgers.edu/location.jsp?id=C71825 • Professor: dr. mary rigdon
◦ Email: mrigdon@rci.rutgers.edu
◦ Office: A103 Psychology Building Annex, Busch Campus
◦ Office Hours: Thursdays 11-12, 1-2 & by appt.
• Grader: Dong-Whan Ko
◦ Email: dko@economics.rutgers.edu

Course Description
This course provides an overview of Behavioral Economics, an emerging field which integrates insights from psychology into economic models of behavior.
We will study ways in which individuals systematically depart from assumptions such as perfect rationality, self-interest, time consistency, etc. We will consider cases of non-standard preferences, non-standard beliefs, and non-standard decision rules. The course will question many of the assumptions of the socalled “standard model” of homo economicus, but not the fundamental emphasis on mathematical tools which characterizes modern economics. Behavioral
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Advanced Microeconomic Topics:
Behavioral Economics

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economics emphasizes formal models of individual choice — similar to those presented in intermediate microeconomics. The goal is to modify standard models so as to increase psychological realism and improve predictive power, not to scrap such models altogether.
We will begin with the foundations, including the standard economic model
(SEM) and its weaknesses, decision-making under risk and uncertainty, and mental accounting. Then we will examine intertemporal choice, including the discounted utility model (DUM) and alternatives to it (e.g., hyperbolic discounting). We will discuss strategic interaction, including behavioral game theory and fairness and social preferences. The last topic will be policy recommendations from the viewpoint of libertarian paternalism and choice architecture (a’la
Dick Thaler). Classroom experiments and demonstrations will be conducted to illustrate key theoretical concepts and empirical regularities.

Readings
Our textbook will be An Introduction to Behavioral Economics by Nick Wilkinson. This course will also focus on articles published in economic and psychology journals. All articles will be made available on Sakai under Resources.

Evaluation
There will be a total of 1000 points possible in this course.
- Two Exams (700 points total): The first exam will be in class on March
7 and will cover chapters 1–5 plus readings. It will be worth a maximum of 350 points. The second exam will be in class on April 23 and will cover chapters 6–8 plus readings. It will be worth a maximum of 350 points. So they each count equally toward your total exam grade. The exam format will be 30 multiple choice, 3 short answer and 2 extra credit questions. - Paper (300 points): A research paper is required for this course. There are two options. (1) Choose a topic and conduct a thorough literature review on that topic or (2) Choose a topic and describe an experimental design that has not been conducted that aims to answer an interesting empirical question. The paper should be 6-10 pages in length, double-spaced, 12 point font. If you hand a rough draft of your paper to me by March 19th

Advanced Microeconomic Topics:
Behavioral Economics

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I will provide feedback. It is due the day of the final exam, May 8, via
Sakai Assignments.
- Extra Credit (10 pts each): For all of the topics we cover, there are many more interesting articles in addition to the one assigned for your required reading. For extra credit, you can choose one of the further readings that are listed below for each topic and write up reaction comments to it. The readings are available on Sakai under Resources - Extra Credit.
Summarize and discuss the article. One page in length, double spaced, 12 point font, and submit using Assignments on Sakai. Due at 12pm on the dates listed for…