Winter Term 2024/2025
Behavioral Economics
Lecture (in presence), 6 ECTS
Time: Tuesday 11:45 -13:15
Room: F423
Tutorial:
starting: 04.11.2024
Time (bi-weekly ):
Monday 17:00 - 18:30, Room: F423
Syllabus:
Neoclassical economic models rest on the assumptions of rationality and selfishness. Behavioral economics investigates departures from these assumptions and develops alternative models. In this lecture, we will discuss in particular inconsistencies in intertemporal decisions, the role of reference points, and non-selfish behavior. We will analyze models that aim in a better description of actual human behavior. In the tutorial, we will analyze the models in more detail and develop applications. The exercises will be uploaded on ILIAS as per schedule.
Content:
22.10.2023 — 0. Introduction
29.10.2023 — 1. Models of intertemporal choice
05.11.2023 — 2. Applications
12.11.2023 — 3. Prospect theory, stochastic extensions of EU; Ambiguity aversion
19.11.2023 — 4. Kőszegi und Rabin (2006) – Theory
26.11.2023 — 5. Applications
03.12.2023 — 6. Inequality aversion
10.12.2023 — 7. Reciprocity
17.12.2023 — 8. Honesty
07.01.2024 — 9. Image concerns
14.01.2024 — 10. Quantal Response Equilibrium; Level-k and cognitive-hierarchy models
21.01.2024 — 11. Heuristics; Learning
28.01.2024 — 12. An Introduction
04.02.2024 — Q & A
Main Literature:
- A comprehensive overview is Sanjit Dhami, 2016, “The Foundations of Behavioral Economic Analysis”. A new version of this book has been released in 7 volumes. You find an entertaining introduction in behavioral economics in George A. Akerlof and Robert J. Shiller, 2009, “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism”, Princeton University Press, Princeton.
We will focus on theoretical papers. The main papers are, in order of appearance:
O’Donoghue, Ted and Matthew Rabin, 1999, “Doing it Now or Later,” American Economic Review,
89(1), 103‐24.
Rabin, Matthew. “Risk Aversion and Expected-Utility Theory: A Calibration Theorem.” Econometrica,
2000, 68(5), 1281-1292.
Loomes, Graham and Sugden, Robert. “Disappointment and Dynamic Consistency in Choice under
Uncertainty. Review of Economic Studies, 53(2), 271-282.
Gul, Faruk. “A Theory of Disappointment Aversion.” Economectrica, 1991, 59(3), 667-686.
Köszegi, Botond and Rabin, Matthew. "A Model of Reference‐Dependent Preferences." Quarterly
Journal of Economics, 2006, 121(4), pp. 1133.
Kahneman, D. and Tversky, A. "Prospect Theory ‐ Analysis of Decision under Risk." Econometrica,
1979, 47(2), pp. 263‐91.
Fehr, Ernst and Schmidt, Klaus M. "A Theory of Fairness, Competition, and Cooperation." Quarterly
Journal of Economics, 1999, 114(3), pp. 817‐68.
Bolton, Gary E. and Ockenfels, Axel. "ERC: A Theory of Equity, Reciprocity, and Competition."
American Economic Review, 2000, 90(1), pp. 166‐93.
Charness, Gary and Rabin, Matthew. "Understanding Social Preferences with Simple Tests." Quarterly
Journal of Economics, 2002, 117(3), pp. 817‐69.
Levine, David K. "Modeling Altruism and Spitefulness in Experiments." Review of Economic Dynamics,
1998, 1(3), pp. 593‐622.
Rabin, M. "Incorporating Fairness into Game‐Theory and Economics." American Economic Review,
993, 83(5), pp. 1281‐302.
Dufwenberg, M. and Kirchsteiger, G. "A Theory of Sequential Reciprocity." Games and Economic
Behavior, 2004, 47(2), pp. 268‐98.
Falk, Armin and Fischbacher, Urs. "A Theory of Reciprocity." Games and Economic Behavior, 2006,
54(2), pp. 293‐315.
Cox, James C., Friedman, Daniel, and Vjollca Sadiraj. “Revealed Altruism.” Econometrica, 2008, 76(1),
31-69.
Charness, Gary and Martin Dufwenberg. “Promises and Partnership.” Econometrica, 2006, 74(6),
579-1601.
Bénabou, Roland, and Tirole, Jean. “Incentives and Prosocial Behavior.” American Economic Review,
2006, 96(5), 1652-1678.
Bénabou, Roland, and Tirole, Jean. “Identity, Morals, and Taboos: Beliefs as Assets.” Quarterly
Journal of Economics, 2011, 126(2), 805-855.
Stahl, Dale O., and Wilson, Paul W.. “On Players' Models of Other Players: Theory and Experimental
Evidence.” Games and Economic Behavior, 1995, 10(1), 218-254.
Nagel, Rosemarie. “Unraveling in Guessing Games: An Experimental Study.” American Economic
Review, 1995, 85(5), 1313-1326.
Costa-Gomes, Miguel, Crawford, Vincent P., and Broseta, Bruno. “Cognition and Behavior in Normal-
Form Games: An Experimental Study.” Econometrica, 2001, 69(5), 1193-1235.
Ho, Teck-Hua, Camerer, Colin, and Weigelt, Keith. “Iterated Dominance and Iterated Best Response
in Experimental “p-Beauty Contests”.” American Economic Review, 1998, 88(4), 947-969.
Camerer, Colin, Ho, Teck-Hua, and Chong, Juin-Kuan. “A Cognitive Hierarchy Model of Games.”
Quarterly Journal of Economics, 2004, 119(3), 861-898.
McKelvey, Richard D., and Palfrey, Thomas R.. “Quantal Response Equilibria for Normal Form
Games.” Games and Economic Behavior, 1995, 10(1), 6-38.
Goeree, Jacob K., and Holt, Charles A.. “A Model of Noisy Introspection.” Games and Economic
Behavior, 2004, 46(2), 365-382.
Economic Decision Making
Lecture (in presence), 5 ECTS
Recommended for Exchange Students
Time: Monday 15:15 - 16:45
Room: G227a
Tutorial:
Time (bi-weekly):
Tuesday, 10:00 - 11:30 (Group 1), Room: E404
Wednesday, 10:00 - 11:30 (Group 2), Room: G307
Syllabus:
Economics studies the behavior and the interaction of economic agents, and how this affects the economy as a whole. In this lecture we focus on the behavior, on how people decide. We address to
main questions: How should we optimally decide? How do people actually take decisions? For the first question, we will derive theories that describe optimal decisions. For the second question, we will discuss empirical evidence on actual behavior. This evidence is often generated using experiments. This evidnece is also the basis for behavioral theories, i.e. theories that describe actual and not necessarily optimal behavior.
Content:
21.10.2024 1. Rational choice under certainty
28.10.2024 2. Decision-making under certainty
04.11.2024 3. Rational probability assessment
11.11.2024 4. Probability judgment
18.11.2024 5. Rational choice under risk and uncertainty
25.11.2024 6. Decision-making under risk and uncertainty
02.12.2024 7. Rational inter-temporal choice and inter-temporal decision-making
09.12.2024 8. Rational strategic interaction I
16.12.2024 9. Rational strategic interaction II
15.01.2025 10. Strategic decision-making
22.01.2025 11. Rational social choice I: Aggregating choices, online
29.01.2025 12. Rational social choice II: Aggregating preferences, online
05.02.2025 13. Collective decision-making; Questions and Answers
Main Literature:
- A Course in Behavioral Economics, Erik Angner, Palgrave Macmillan 2016 (second edition).
Additional readings:
- Thinking, Fast and Slow, by Daniel Kahneman (Macmillan, 2011).
Programming Economic Experiments with z-Tree
Course (in presence), 6 ECTS
Registration by Friday, 09/01/25 to office.fischbacher@uni-konstanz.de
Dates:
Monday, 17/02/25 , Room G227
Tuesday, 18/02/25 , Room G227
Wednesday, 19/02/25 , Room G203
Time: 9:00 - 16:45 Uhr
Syllabus:
z-Tree is a widely used software package for developing and carrying out economic experiments. The language used to define the experiments is simple and compact, meaning that experiments can be developed quickly, and programming experience is not necessary, though useful. z-Tree is flexible both with respect to the logic of interaction and the visual representation, allowing the simple programming of normal form games, extensive form games, double auctions, or clock auctions, for example.
Design and Data Analysis for Experiments
Course (in presence), 6 ECTS
Registration by Saturday, 15/11/24 to office.fischbacher@uni-konstanz.de
Dates:
Friday, 22/11/2024
Friday, 13/12/2024
Friday, 17/01/2025
Time: 8:30 - 12:30 Uhr; 13:30 - 17:00 Uhr
Location:
Thurgau Institute of Economics (TWI),
Hafenstrasse 6, CH-8280 Kreuzlingen.
Syllabus:
Experiments have developed to become an established method in economics, in addition to theory and the empirical analysis of field data.
Econometrically, experiments have important advantages compared to non-experimental data sets. They allow controlling the parameters of the situation, which reduces uncontrolled variance. Most importantly, exogenous treatment variations allow drawing causal conclusions.
Nevertheless, there are also econometrical problems typical for experimental data. Data sets are small, variables are often discrete and the interaction in a typical experiment creates dependencies in the data. This course gives an introduction to the experimental method and discusses the econometric problems typical in the analysis of economic experiments.