BEHAVIORAL ECONOMICS: FOUNDATION
Obiettivi formativi
Aim of the course is to give concepts, instruments and tools in order to apply behavioral economic insights to marketing topics.
Risultati di apprendimento attesi
Learning the main concepts of behavioral economics; acquiring knowledge about the main methods of behavioral economics and their capability to affect actual choices; understanding how markets can be affected by bias, emotions and cognitive limitations and the strategies that can be implemented.
Contenuti Del Corso
The content of the course covers topics like bounded rationality, trust and reciprocity, social preferences, risk attitudes and auctions. Each theoretical topic will be supplemented by experimental models and real-world examples.
Testi Di Riferimento
Cartwright, Edward. Behavioral Economics. 4th ed. London: Routledge, 2024.
Metodologie Didattiche
Theory and applications of the main topics of the book are included in power point presentation. Students will have access to these slides, as well as they are provided with additional written materials and articles.
Modalità di verifica dell'apprendimento
Done the
Criteri per l’assegnazione dell’elaborato finale
Passed the exam.
Settimana 1
Introduction to Behavioral Economics.
1.1. Brief history of behavioral economics.
1.2. Experiment as a method of Behavioral Economics.
1.3. Games as a combination of strategies and payoffs.
1.4. Practical part. How to transform a research question to a testable game? Examples.
Settimana 2
2.1 How individual behavior is affected by bounded rationality.
2.2 Heuristics: definition and examples. Framing, Fungibility and Mental Accounting, Endowment effect.
2.3. The role of emotions. Regrets.
2.4 Conjunction fallacy. A story of Linda.
Settimana 3
The lecture is about social preferences -- why do people cooperate and others do not?
3.1 Main concepts. Altruism. Trust and reciprocity.
3.2 Classic experiments: Dictator Game, Trust Game.
3.3. Fairness ideal and inequality aversion. How to test inequality aversion through a laboratory experiment? Examples.
Settimana 4
The lecture is about equilibrium concepts in economics.
4.1. Nash equilibrium. Individual rationality.
4.2. Pareto optimum. Social optimality.
4.3. Relation between equilibrium and efficiency. Does individual equilibrium entail social optimum?
Settimana 5
The lecture is about public goods and prosocial behavior.
5.1. Public Goods, definition and characteristics.
5.2. Classic experiment: Public Goods Game. What is conditional cooperation? What affects the level of conditional cooperation?
5.3. Real-world consequences of public goods under-provision. Tragedy of the Commons.
5.4. How to incentivize people to contribute to public goods? Public Goods Game with punishments. Public Good Game with thresholds.
Settimana 6
The lecture about choice with risk.
6.1. Risk attitudes. Risk aversion, risk-loving, risk neutrality. Can risk neutrality be attained in practice? The Allais paradox.
6.2. Prospect Theory and loss-aversion.
6.3. Practical applications of risk attitude.
-- 6.3.1. The ostrich effect in financial trading.
-- 6.3.2. The choice of an insurance plan.
Settimana 7
This lecture is about an auction as a decision-making framework.
7.1. Auctions, definitions and examples. English auction. Dutch auction. First and second price sealed bid auction. Common value auction.
7.2. Winner's curse and overbidding in common-value auctions.
Settimana 8
This chapter outlines the formalization of human interaction within experimental design.
8.1. The beauty contest. Framework, mane takeaways.
8.2. Learning effect. Single round- and repeated games. Learning models.
8.3. Signals. Biased signals. Communication during the experiment. Does communication affect prosocial behavior?
Settimana 9
9.1 Trust and reciprocity
9.2 Conditional reciprocity
9.3 Cultural and individuals’ characteristics in shaping such tendencies
Settimana 10
10.1 Choosing when to act, i.e. intertemporal decision making.
10.2 Exponential discounting
10.3 Hyperbolic discounting and quasi hyperbolic discounting
10.4 Temptations and self-control
10.5 Time and risk
Settimana 11
11.1 Learning from new information
11.2 Bayesian updating
11.3 The Ellsberg paradox
11.4 Conformity bias and herding
11.5 Law of small numbers and anchoring
11.6 Asymmetric information and signals
Settimana 12
12.1 Applications: health care, bubbles and bust, voting in elections
12.2 Individuals versus team choices.
12.3 Asymmetric information
12.5 Acquiring a company game and lying
12.6 Moral hazard and adverse selection