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Behavioral and Experimental Economics
Economics 490

Spring 2012

Professor: J. Peter Ferderer

Time & Place: Tueday & Thursday 9:40-11:10pm, Carnegie 305 and Humanities 302 or 304

Office Hours: Monday 9:00-11:00am, Wednesday 1:00-2:30pm and by appointment

Course SyllabusPDF file      กกกก

Reading List                                                                             

Note: Articles/chapters marked with "D" (for discussion) should be read before class so students are fully prepared to participate in Q&A. Articles/chapters marked with "P" (for material professor will lecture on) should be read before class as well so students get more out of the lecture, can better respond to my queries, and bring their own questions about the readings to class. With one exception (Jan. 26), students should read chapters from Holt after class so that their behavior in experiments is not influenced by knowledge of what the experiments attempt to measure.

Jan. 24 (TU) - Introduction        

[1-P] Camerer, "The Behavioral Challenge to Economics," 2003, pp. 3-24.

Jan. 26 (TH) -- Experimental Methods ( Humanities PC Lab -- H302)
[1-D] Experiment: Bank Runs
[2-D] Holt, Chapters 1 and 2.

Individual Decision Making

Jan. 31 (TU) -- Heuristics and Biases
[1-D] Thaler and Sunstein, Nudge, Ch. 1.
[2-D] Tversky and Kahneman, "Judgment under Uncertainty: Heuristics and Biases," Science, vol. 185, 1974.

Feb. 2 (TH) -- Discounting and Self-Control Problems
[1-P] DellaVigna, "Psychology and Economics." JEL, June 2009, pp. 318-24.
Thaler and Sunstein, Nudge, Ch. 2

Feb. 7 (TU) -- Expected Utility Theory (Humanities PC Lab -- H302)
[1-D] Experiment: Betting in Russia

[2-P] Econ Port, "Introduction to Decision Making Under Uncertainty."
[3-D] Experiment: Lotteries & Allies Paradox (Holt, Ch. 4 & Ch. 28)
[4-D] Experiment: Mugs and Pizza

Feb. 9 (TH) -- Prospect Theory & Reference Dependence
[1-P] DellaVigna, "Psychology and Economics." JEL, June 2009, pp. 324-28.
[2-D] In Class Video: Daniel Kahneman's 2002 Nobel Prize Address.
[3-D] Camerer, "Prospect Theory in the Wild: Evidence from the Field," in Choice, Values and Frames, December 1998.

Feb. 14 (TU) -- Testing Prospect Theory
[1-P] DellaVigna, "Psychology and Economics." JEL, June 2009, pp. 328-36.
[2-S] List, "Does Market Experience Eliminate Anomalies?" QJE, February 2003.

Feb. 16 (TH) -- Bayesian and Nonstandard Beliefs (Humanities PC Lab -- H302)
[1-D] Experiment: Bayes' Rule (Holt, Ch. 30)
[2-P] DellaVigna, "Psychology and Economics." JEL, June 2009, pp. 341-47.
[3-D] Kahneman and Thaler, "Utility Maximization and Experienced Utility," JEP, Winter 2006.
[4-D] Video: Dan Gilbert on Mistaken Expectations
[5-D] Video: Dan Gilbert on Happiness.

Feb. 21 (TU) -- Nonstandard Decision Making

[1-P] DellaVigna, "Psychology and Economics." JEL, June 2009, pp. 347-60.
[2-D] Experiment: Ellsberg's Paradox
[3-S] Hsu, et al., "Neural Systems Responding to Degrees of Uncertainty in Human Decision-Making," Science, 12/9/2005.

Feb. 23 (TH) -- The Role of Human Evolution
[1-D] Cosmides and Tooby, "Evolutionary Psychology: A Primer," 12/06.
[2-D] Pinker, The Blank Slate, Chapters 13 (skip 3rd section on the soul).
[3-D] Kendrick, et al., "Deep Rationality: The Evolutionary Economics of Decision Making, 2008.
[4-D] Video: Mirror Neurons
[5-D] Video: Pinker Lecture

Feb. 28 (TU) -- The Role of Human Evolution
[1-S] Chen, et al., "How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior," JPE, 2006.
[2-S] Kenrick, Neuberg, Li, "Economic Decision Biases and Fundamental Motivations: How Mating and Self-protection Alter Loss Aversion." J. of Personality and Social Psychology, 2011.
[3-D] Video: Mating and Loss Aversion
[4-S] McClure, et al., "Separate Neural Systems Value Immediate and Delayed Monetary Rewards," Science, October 2004.
[5-S] Coates, et al., "Second-to-Fourth Digit Ratio Predicts Success among High- frequency Financial Traders," PNAS, January 13, 2009.

Mar. 1 (TH) -- First Exam

Social Preferences

Mar. 6 (TU) -- Game Theory ( Humanities Lab -- H302)
[1-D] Experiment: Matrix Games (Holt, Ch. 3.)
[2-D] Holt and Roth "The Nash Equilibrium: A Perspective," PNAS 2004.
[3-D] The Matematics of Strategy, PNAS

Mar. 8 (TH) -- Fariness and Equity (Humanities Lab -- H302)
[1-D] Experiment: Ultimatum and Dictator Games (Holt, Ch. 12.)

[2-D] Camerer and Thaler, "Anomalies: Ultimatums, Dictators and Manners ," JEP, Spring 1995.

Spring Break

Mar. 20 (TU) -- Trust and Reciprocity (Humanities Lab -- H302)
[1-D] Experiment: Trust & Labor Market Reciprocity (Holt, Ch. 13.)

Mar. 22 (TH) -- Public Goods (Humanities Lab -- H302)
[1-D] Experiment: Voluntary Contributions (Holt, Ch. 14.)
[2-D] Henrich, et al., "In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies," AER, May 2001.
[3-D] Levitt and List, "What do Laboratory Experiments Measuring Social Preferences Reveal about the Real World?" JEP, Spring 2007.

Mar. 27 (TU) -- Human Cooperation
[1-S] Fehr and Fischbacher, "The Nature of Human Altruism," Nature, 10/23/2003.

[2-D] Bowles and Gintis, A Cooperative Species: Human Reciprocity and Its Evolution, 2011, Chapter 5 & 12.
[3-P] DellaVigna, "Psychology and Economics." JEL, June 2009, pp. 336-41.

Mar. 29 (TH) -- The Role of Emotions in Decision Making

[1-D] Pinker, The Blank Slate, Chapter 14.
[2-D] Bowles and Gintis, A Cooperative Species: Human Reciprocity and Its Evolution, 2011, Chapter 11.

Apr. 3 (TU) -- Social Learning (Humanities Lab -- H302)
[1-D] Surowiecki, The Wisdom of Crowds, Ch. 1 and 2.
[2-D] Video: Scott Page on the Power of Diversity
[3-D] Experiment: Information Cascades (Holt, Ch. 31.)

Apr. 5 (TH) -- Social Learning
[1-P] Bikhchandani, et al.," Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," JEP, Summer 1998
[2-D] Thaler and Sunstein, Nudge, Ch. 3.
[3-P] Camerer and Fehr, "When Does 'Economic Man' Dominate Social Behavior?" Science, 1/6/2006.

Apr. 10 (TU) - Second Exam

Market Responses

Apr. 12 (TH) -- Auctions (Humanities Lab -- H302)
[1-D] Experiment: Private and Common Value Auction
(Holt, Ch. 19-21.)

Apr. 17 (TU) -- Behavioral Finance (Humanities Lab -- H302)
[1-D] Experiment: A Limit Order Asset Market (Read Ch. 11 of Holt after class.)
[2-S] Shleifer, "Are Financial Markets Efficient" in Inefficient Markets: An Introduction to Behavioral Finance," 2000.

Apr. 19 (TH) -- Behavioral Macroeconomics

[1-D] Akerlof and Shiller, Animal Spirits, Chs. 1-8.
[2-D] Video: Shiller on Animal Spirits I
[3-D] Video: Shiller on Animal Spirits II

Apr. 24 (TU) -- The Economics of Happiness
[1-D] Easterlin, Explaining Happiness," PNAS, 2003.
[2-S] Helliwell and Barrington-Leigh, "Measuring and Understanding Subjective Well-being?"
[3-D] Video: The Happy Danes

Apr. 26 (TH) -- Welfare Economics

[1-D] Thaler and Sunstein, Nudge, Introduction and 4-9.
[3-D] Video: Cass Sunstein on Nudge
[4-D] Video: Richard Thaler on Nudge

May 1 (TU) -- Term Paper Presentations


Behavioral Econoimcs and The Sub-Prime Financial Crisis
Thaler and Sunstein in the Financial Times, 11/11/2008
Peter Bernstein, Against the Gods: The Remarkable Story of Risk, January 2008.
Nassim Taleb (The Black Swan) and Benoit Mandelbrot, January 2008.
Paul Samuelson and Robert Merton on the Crisis, January 2009.
Alan Greenspan, "I Was Wrong" November 2008.
Bird and Fortune on the Financial Crisis.

Kahneman and Taleb ("The Black Swan") on Risk Taking in the Financial Crisis, 2009




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