Behavioral Economics and Game Theory

Aims of the course

This course connects the fields of psychology, economics, and game theory to present transformation in explaining the behavior of economic agents from the assumption of perfect rationality towards observed patterns of economic behavior and decisions that are not based on such strict assumptions.

The goal of the course is for students to learn about the differences between conventional economic understanding of agents’ decision-making and how the latter actually decide. The course will present knowledge and skills to observe, analyze and understand decision-making process of economic agents given the environments where the respective decisions are taken.

At the end of the course, students will:
- recognize ideas, concepts, theories, and findings from the respective subfields of study
- be able to apply these ideas and findings when solving real-life problems (e.g., questions of public policy, ethics, problems in consumer choice, marketing, finance, management)
- be able to provide a sound and informed opinion on fundamental issues in economic decision making (e.g., freedom to choose, rationality, self-interest, altruism, fairness, preference developments)

Course syllabus

1. Foundations
1.1 Values, Preferences and Choices
1.2 Beliefs, Heuristics and Biases
1.3 Mental Accounting

2. Decision Making and Uncertainty
2.1 Bracketing Decisions
2.2 Representativeness and Availability
2.3 Confirmation and Overconfidence
2.4 Decisions under Risk and Uncertainty
2.5 Prospect Theory

3. Intertemporal Choice

4. Strategic Interaction
4.1 Behavioral Game Theory
4.2 Social Preferences

Course director(s)