EC345: Behavioural Economics: Theory and Applications

Alexander Dobson
Module Leader
Mahnaz Nazneen
Module Lecturer

15 CATS - Department of Economics

Summer Module

Autumn Module

Principal Aims

EC345-15 Behavioural Economics: Theory and Applications

Principal Learning Outcomes

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.

Syllabus

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.

Context

Optional Module

LM1D (LLD2) - Year 3, LM1D (LLD2) - Year 4, GL11 - Year 3, GL12 - Year 4, V7ML - Year 3, V7MM - Year 4, LA99 - Year 3, R9L1 - Year 4, R3L4 - Year 4, R4L1 - Year 4, R2L4 - Year 4, R1L4 - Year 4, L1L8 - Year 3, L1CA - Year 3, L1CB - Year 4

Pre or Co-requisites

EC202-30 Microeconomics 2 OR

EC204-30 Economics 2 OR

EC238-15 Economics 2: Microeconomics

Summary:

Modules: EC202-30 or EC204-30 or EC238-15

Assessment

Assessment Method: Coursework (20%) + In-person Examination (80%)
Coursework Details: In-person Examination (80%) , in-class test (20%)
Exam Timing: Summer

Exam Rubric

Time Allowed: 2 Hours

Read all instructions carefully - and read through the entire paper at least once before you start entering your answers.

There are TWO sections in this paper. Answer ALL questions in Section A (18 marks each) and ONE question in Section B (28 marks).

Answer each whole question in a separate booklet.

Approved scientific (non-graphical) pocket calculators are allowed.

You should not submit answers to more than the required number of questions. If you do, we will mark the questions in the order that they appear, up to the required number of questions in each section.

Previous exam papers can be found in the University’s past papers archive. Please note that previous exam papers may not have operated under the same exam rubric or assessment weightings as those for the current academic year. The content of past papers may also be different.