At the end of the course, the student should be able tom:
1. define rational theories of decision: how should people make decisions?
2. define and discuss critically the notion of economic rationality: what are rational decisions?
3. recognize widespread deviations from rational decisions: how and when do people make (predictably) irrational decisions?
4. define behavioral theories of decision: how do people in fact make decisions?
5. apply state-of-the-art behavioral methods: how can we measure risk, time, and social preferences of people?
6. realize the usefulness of behavioral economics: how can we help ourselves and others make better decisions?
This course is about theories of decision making in economics and business: how people ought to make decisions and how they in fact make decisions. At the end of the course, the students will be able to (1) understand what neoclassical economists mean by “rational agent” and (2) recognize when (and why) people act irrationally when making decisions. The course will cover mainstream behavioral theories of (1) decision under certainty, (2) judgment and decision under uncertainty, (3) intertemporal choice, and (4) decision under strategic interaction. Throughout the course, the students will learn state-of-the-art behavioral methods and participate interactive discussions about a variety of applications that will demonstrate the usefulness of behavioral economics.
