Behavioural Economics makes assumptions about human agents that are grounded in empirical work in psychology and experiments (whether in the laboratory or in the field). This course will focus on conceptual foundations (core assumptions and models), problem solving and applications to topics such as psychology of poverty, boundedly rational consumers and behavioural finance: the emphasis will be on insights about human behaviour and institutions that are new, interesting and policy-relevant.  

Lectures: 10 x 2-hour lectures

Tutorials: 5 x 1-hour tutorials

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1. In-course exam: online; Individual; 90 minutes; 35%; ILOs 1-2, 4.

2. Degree exam: online; Individual; 120 minutes; 65%; ILOs 1, 3-5.

This course aims to provide an introduction to Behavioural Economics and its relationship with neoclassical economic theory. The focus will be on decision making by individuals in a variety of contexts such as choosing under uncertainty, intertemporal decision making and strategic considerations in decision making.  

By the end of this course students will be able to: 

1. Identify and critically evaluate both the strengths and weaknesses of the rationality assumption in Economics;

2. Recognise and clearly explain some heuristics and biases that affect people's thinking such as anchoring and adjustment, base-rate neglect, loss aversion and ambiguity aversion;

3. Understand traditional models of Economics and models of Behavioural Economics such as reference dependent preferences, dynamically inconsistent preferences, social preferences, psychological games and behavioural game theory;

4. Learn how to identify an effect from the data and econometrically estimate a model

5. Think of ways to unify all behavioural models in one single model with few fundamental principles and one coherent theory like the traditional model based on individual rationality