The course aims to provide students with appropriate tools for conducting controlled economic experiments and with concepts of behavioral economics, paying attention to alternative theories of individual choice behavior.
The available evidence in psychology and economics suggests that individuals' behaviors deviate from the standard economic theory systematically. In this course, we will introduce the modern advances in behavioral economics and bounded rationality, including time-inconsistent preferences and self-control, judgment under risk and uncertainty, imperfect knowledge and social emotions, and show the economic implications of those psychologically richer models. Meanwhile, we aim to answer the question why individuals are "biased", and tend to find the link of some aspects of psychological regularities.
The course deals with methodological, theoretical, historical and practical aspects of experimental and behavioral economics.
Students are expected to read and discuss several papers that attempt to synthesize existing models in psychology and economics. Finally, we will present empirical papers drawn from a variety of fields (consumption, development economics, environmental economics, health economics, labor economics, political economy) as possible applications of these behavioral insights.
Throughout the course we will do our best to point out what seem to us like good directions for research in behavioral economics. In addition, as an incentive to get you started, the exam consists of analyzing a specific paper and proposing a possible extension.
MODULE 1 (Levati)
- Introduction. Methodology of Experimental Economics. What sort of knowledge social scientists can collect in the laboratory and what experiments can tell us about economic theories. Specific methods and techniques for conducting economic experiments, focusing on basic rules for reaching control in experiments. What is a field experiment: a taxonomy and a brief history.
- Social preferences, Inequity Aversion and Reciprocity (theory and experimental evidence).
MODULE 2 (Quercia):
- Risk preferences, reference dependence, prospect theory (theory and experimental evidence).
- Time preferences, time inconsistency, present bias and hyperbolic discounting (theory and experimental evidence and strategies to tackle self-control problems).
MODULE 3 (Piovesan)
- Behavioral Insights / Nudging theory and applications to environment, health, education, charitable giving, saving, discrimination.
Students have to read a recent paper on Behavioral and Experimental Economics (theoretical or empirical) suggested by us and write: 1) a "referee report" containing a short summary of the paper, a detailed analysis of the strengths and weaknesses of the paper; 2) a proposal of a possible extension of that paper.