Behavioral Economics 2400-ZEWW791
The course consists of three main parts: methodology overview and models of preferences; models of learning and local interactions; and financial and macroeconomic agent-based models. The course has the following outline:
I. Preferences:
1. Introduction to behavioral economics and the paradoxes of rationality.
2. Experimental methodology, case study: other-regarding preferences.
3. Applying experiments to theory design, case study: prospect theory.
II. Local interaction:
4. Game theory vis a vis experiments, case study: Prisoner’s Dilemma.
5. Evolutionary game theory.
6. Learning models.
7. Q-learning with applications to Industry Organization.
8. Introduction to behavioral finance.
III. Agent-based models:
9. Complexity and emergent properties, case study: Schelling model.
10. Heuristic Switching Model.
11. Genetic algorithms and individual vs. social learning.
12. Dynamic heuristics.
13. EURACE and macroeconomic ABMs.
14. ABM application to the energy transition problem.
|
Term 2024L:
None |
Type of course
Course coordinators
Term 2024L: | Term 2025L: |
Learning outcomes
Knowledge:
1. Students understand the notion of bounded rationality and its relationship with the paradigm of perfect rationality.
2. Students know the fundamentals of experimental methodology.
3. Students know popular learning models and ABMs.
Skills:
1. Students are able to build economic models based on a conscious choice of realistic assumptions with regards to the behavior of the economic agents.
2. Students are able to design an economic laboratory experiment.
Assessment criteria
The grade will be based on an approximately 10-pages long essay, which the students have to submit by the end of the course. Students’ task is to choose a topic from the overall subject matter of the course, provide a brief literature review on that topic, and then one from the following two:
- a proposal of an experiment on the topic, which should contain the exact methodology of the data analysis (remark: running the experiment is not required for the essay);
- a small but original behavioral model on the topic.
Bibliography
Compulsary literature:
Kirman, A. P. (1992). Whom or what does the representative individual represent?. Journal of Economic Perspectives, 6(2), 117-136.
Additional literature:
Anufriev, M., Assenza, T., Hommes, C., and Massaro, D. (2013). Interest rate rules and macroeconomic stability under heterogeneous expectations. Macroeconomic Dynamics, 17(8), 1574-1604.
Anufriev, M., Hommes, C.\ and Makarewicz, T.\ (2019). Simple forecasting heuristics that make us smart: Evidence from different market experiments. Journal of the European Economic Association, 17(5), 1538-1584.
Barrage, L. and Nordhaus, W. (2024). Policies, projections, and the social cost of carbon: Results from the DICE-2023 model. Proceedings of the National Academy of Sciences,
121(13), e2312030121.
Branch, W. A. (2004). The theory of rationally heterogeneous expectations: evidence from survey data on inflation expectations. The Economic Journal, 114(497), 592-621.
Brock, W. A., and Hommes, C. H. (1997). A rational route to randomness. Econometrica, 1059-1095.
Calvano, E., Calzolari, G., Denicolo, V., and Pastorello, S. (2020). Artificial intelligence, algorithmic pricing, and collusion. American Economic Review, 110(10), 3267-3297.
Camerer, C., and Hua Ho, T. (1999). Experience-weighted attraction learning in normal form games. Econometrica, 67(4), 827-874.
Clark, W. A. (1991). Residential preferences and neighborhood racial segregation: A test of the Schelling segregation model. Demography, 28(1), 1-19.
Cooper, D. J., and Kagel, J. H. (2016). Other-regarding preferences. The handbook of experimental economics, 2, 217.
Dosi, G., Fagiolo, G., and Roventini, A. (2010). Schumpeter meeting Keynes: A policy-friendly model of endogenous growth and business cycles. Journal of Economic Dynamics and Control, 34(9), 1748-1767.
Fehr, E., and Gachter, S. (2000). Cooperation and punishment in public goods experiments. American Economic Review, 90(4), 980-994.
Frey, B. S., and Meier, S. (2004). Social comparisons and pro-social behavior: Testing" conditional cooperation" in a field experiment. American Economic Review, 94(5), 1717-1722.
Hommes, C., and Lux, T. (2013). Individual expectations and aggregate behavior in learning-to-forecast experiments. Macroeconomic Dynamics, 17(2), 373-401.
Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. American economic review, 93(5), 1449-1475.
Jang, B., Kim, M., Harerimana, G., and Kim, J. W. (2019). Q-learning algorithms: A comprehensive classication and applications. IEEE access, 7, 133653-133667
Kirman, A. P., and Vriend, N. J. (2001). Evolving market structure: An ACE model of price dispersion and loyalty. Journal of Economic Dynamics and Control, 25(3-4), 459-502.
Lamperti, F., Dosi, G., Napoletano, M., Roventini, A. and Sapio, A. (2020). Climate change and green transitions in an agent-based integrated assessment model. Technological Forecasting and Social Change, 153, 119806.
Levitt, S. D., and List, J. A. (2007). What do laboratory experiments measuring social preferences reveal about the real world?. Journal of Economic perspectives, 21(2), 153-174.
Miller, J. H. (1996). The coevolution of automata in the repeated prisoner's dilemma. Journal of Economic Behavior \& Organization, 29(1), 87-112.
Noussair, C. N., and Tucker, S. (2013). Experimental research on asset pricing. Journal of Economic Surveys, 27(3), 554-569.
Schelling, T. C. (1971). Dynamic models of segregation. Journal of mathematical sociology, 1(2), 143-186.
Smith, V. L., Suchanek, G. L., and Williams, A. W. (1988). Bubbles, crashes, and endogenous expectations in experimental spot asset markets. Econometrica, 1119-1151.
Tversky, A., and Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5(4), 297-323.
Tversky, A., and Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131.
Weibull, Jörgen W. Evolutionary game theory. MIT press, 1997.
|
Term 2024L:
None |
Notes
|
Term 2024L:
None |
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: