LUISS

School of Government – MIPA (2018) Syllabus

Behavioral Economics and Decision Making

 

takanawa

Seminars Content

 

This series of seminars is intended to allow students to become familiar with the literature in behavioral economics and decision making. While this approach is based on the experimental data about human reasoning (provided by cognitive psychology and neurosciences), students will be driven to test experimentally properties and assumptions on human decisions. Major goals will be that of enabling students to gain understanding of the major aspects of behavioral decision-making under uncertainty, and applications to economics, politics and finance. The Course aims also at introducing the students to the psychological aspects of decision making in organizational, social and political context. In particular some special features of decisions in public policy and international politics will be deepened.

 

Part One  (prof. Egidi)

 

1.Course Presentation. Predictably irrational? (Talk: Crash Course; Dan Ariely’s Ted Talks).

2 . Rational Choice Theory primer. (Expected Value,  Fair Games, St Petersburg Game, Expected Utility, Risk Aversion)

Classic violations of rationality: Two experiments.

3 . Cognition. Rational Choice and the Framing of Decisions. Dual Process of reasoning; judgment and decision making. (Readings: Evans 2003, Tversky             and  Kahneman 1986) .   (a summary: Egidi The Dual Process Account of Reasoning.)

4.  Basic Elements of Prospect Theory. Value function. (Readings: Tversky and Kahneman 1986)

5.  Heuristics and Biases. (Talk: What are Heuristics. Readings: Tversky and Kahneman 1974)

6.  Confirmation Bias. Echo Chambers. The spreading of misinformation on Social Media (Readings : Del Vicario & others 2016, (model excluded); Quattrociocchi & others 2016 )

 

 

Immagine correlata

 

Reference reading material

 

Talks

Ariely D.  Predictably Irrational – basic human motivations (Ted Talk on

https://www.youtube.com/watch?v=9X68dm92HVI&t=716s

Ariely D.  Are we in control of our decisions?  Ted Talk on

https://www.youtube.com/watch?v=wfcro5iM5vw)

Crash Course in Behavioral Economics  https://www.youtube.com/watch?v=dqxQ3E1bubI

What are Heuristics https://www.youtube.com/watch?v=ReFqFPJHLhA

 Intuition and reasoning discussed by Simon and by Kahneman

 

 

Papers

Del Vicario M,, and others (2016)  The spreading of misinformation on line.  PNAS January 19, 113 (3) pp. 554-559; http://www.pnas.org/content/113/3/554.full

Egidi M.  TheDualProcessAccountOfReasoning

Evans J. (2003) In two minds: dual-process accounts of reasoning  Trends in Cognitive Sciences Vol.7 No.10  October 2003

http://docenti.luiss.it/egidi/files/2013/05/Evans.pdf

Quattrociocchi W., Scalia A. and Sunstein C.R. (2016) Echo Chambers On Facebook, http://www.law.harvard.edu/programs/olin_center/papers/pdf/Sunstein_877.pdf

Tversky, A. and Kahneman, D. (1986) Rational Choice and the framing of decisions, The Journal of Business, 59(4), pp. S251–S278.

http://docenti.luiss.it/egidi/files/2012/02/TverskyKahneman.pdf

Amos Tversky and Daniel Kahneman (1974) Judgment under Uncertainty: Heuristics and Biases, Science New Series, Vol. 185, No. 4157 (Sep. 27, 1974), pp. 1124-1131

http://ise.tamu.edu/people/faculty/Bickel/INEN627/ExtraReadings/Tversky%20Kahneman%201974.pdf

 

Immagine correlata

Free Lectures

Ultimatum game: Machiguenga

Kahnemann Nobel Lecture

Simple heuristics that make us smart

Advanced issues

A  Summary of   Utility and Prospect  Theory

 Prospect Theory discussed by Kahneman

hakonepa

Educational goals    This course is intended to allow students to become familiar with  the literature in  behavioral economics and political  decision making . While this approach is based on the experimental data about human reasoning (provided by cognitive psychology) , students will be driven to test experimentally properties and assumptions on human decisions.Major goals will be that of enabling students to gain in-depth understanding of the major aspects of  behavioral decision-making under uncertainty, and applications to economics, politics and finance, as well as to apply effectively the theories to ongoing debates, in order to raise their interest in carrying out research in this field.

Teaching method  In-class lectures, computer-aided exercises and test sets, tutorials

Assessment Method  Computer-aided written final paper

Criteria for deciding on subject of final paper  Exam grade, one-on-one colloquium

Preparatory courses   Microeconomics , Elementary Statistics

Students are supposed to be familiar with the basic issues in Risk and Decision Making. One possible suggested reference  reading on this matter is chapter “Risk and Decision Making”, in  “Markets, Games, and Strategic Behavior: Recipes for Interactive Learning” by Charles Holt. Downloadable at  http://harbaugh.uoregon.edu/Readings/expbooknsf.pdf

 

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