Behavioral Economics

The objective of this course is to provide students with an overview of the main areas of behavioral economics, by acknowledging the behavioral implications of theoretical models, looking at the empirical evidence, and focusing on the development of behavioral models to capture the empirical trends.

The workhouse of economic modelling is homo-economicus; that is, an agent characterized by an infinite ability to make rational decisions. Rationality means that agents update their beliefs correctly, in the manner described by Bayes’ Law when they receive new information, and (ii) given their beliefs, make choices that are normatively acceptable in the sense that they are consistent with the expected utility framework.

This traditional framework is appealing and simple hence it would be very comforting if its predictions were confirmed in the data. In recent years, however, anecdotal evidence as well as theoretical and empirical research has shown this paradigm to be insufficient to describe various features of actual markets. In behavioral economics, we thus add some reality to the standard models of economics by incorporating features of human nature, such as bounded rationality, biases in interpreting information, interdependent preferences, emotions, and learning.

The course comprises of lectures. The course grade is determined based on the student’s performance in the two-hour, written, final examination.

Website of the course: http://christosaioannou.com/BehavioralEcon.html

Teacher: Christos A. Ioannou (christos.ioannou@univ-paris1.fr)

Practical Information: S3, 36h, Campus Jourdan, cours du M2 APE.