Dr Matthew Levy 32L3.21

This course is available on the BSc in Econometrics and Mathematical Economics, BSc in Economics, BSc in Economics with Economic History, BSc in Mathematics and Economics, BSc in Mathematics with Economics, BSc in Mathematics, Statistics, and Business and BSc in Philosophy and Economics. This course is available as an outside option to students on other programmes where regulations permit. This course is not available to General Course students.

Students taking the course as an outside option are required to meet the pre-requisites as detailed below.

Ideally, students will have completed EC202 (or equivalent). A highly motivated student who has done well in EC201 -- as a guideline 65 or better – is welcome on the course, if he or she finds handling economics mathematically comes naturally. Any such student should see Dr Levy before the course starts.  Fluency in calculus is essential, and some knowledge of methods of mathematical proof, including those using sets, is necessary.

The course will expose students to  a number of major topics in Behavioural Economics, and will link theory with empirical applications. The first half of the course will focus on departures from neoclassical preferences, while the latter half will cover departures from rational expectations. The particular topics to be covered include: • Reference Dependent Preferences and Loss Aversion • Social Preferences • Hyperbolic Discounting • Naiveté and Self-Control • Projection Bias • Happiness and Adaptation • Heuristics and Biases • Inattention and Shrouding • Nudging and Framing • Behavioural Welfare Analysis

15 hours of lectures and 10 hours of classes in the MT. 15 hours of lectures and 10 hours of classes in the LT.

At least four exercises or pieces of written work will be required and assessed by class teachers.

Congdon, William, Jeffrey Kling, and Sendhil Mullainathan. Policy and Choice: Public Finance Through the Lens of Behavioral Economics (selected chapters). Brookings Institution Press: Washington, D.C. 2011

[Free eBook download at http://www.brookings.edu/press/Books/2011/policyandchoice.aspx]

Rabin, Matthew. ‘Psychology and Economics’, Journal of Economic Literature, 36(1), 1998: 11-46.

DellaVigna, Stefano. ‘Psychology and Economics: Evidence from the Field’, Journal of Economic Literature, 47(2), 2009: 315-372.

Fehr, Ernst and Simon Gachter. ‘Fairness and Retaliation: The Economics of Reciprocity’, Journal of Economic Perspectives, 14(3), 2000: 159-181.

Laibson, David. ‘Golden Eggs and Hyperbolic Discounting’, The Quarterly Journal of Economics, 112(2), 1997: 443-477.

Camerer, Colin, Linda Babcock, George Loewenstein, and Richard Thaler. ‘Labor Supply of New York City Cabdrivers: One Day at a Time’, The Quarterly Journal of Economics, 112, 1997: 407-441.

Gabaix, Xavier and David Laibson. ‘Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets’, The Quarterly Journal of Economics, 121(2): 505-540.

Bernartzi, Shlomo and Richard Thaler. ‘Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving’, Journal of Political Economy, 112(1), 2004: S164-S187.

Kahneman, Daniel and Amos Tversky. ‘Prospect Theory: An Analysis of Decision under Risk’, Econometrica, 47(2), 1979: 263-292.

Exam (100%, duration: 3 hours, reading time: 15 minutes) in the summer exam period.