040832 KU Behavioral and Experimental Economics (MA) (2025S)

Content:
Human decisions and judgements are often based on intuitions and feelings, and not exclusively on purely rational considerations. This has important implications for how we deal with risk and uncertainty, how we plan and prepare for the future, and how we form expectations about the future. In the first part of this course, it will be illustrated how insights from psychology can improve our understanding of important economic decisions such as consumption, saving, and insurance from a theoretical point of view.
Economics is also about interaction between people. Individuals interact in markets, as buyers and sellers, but also in organizations, on the internet, in politics, on the street, and at home. Standard economics models this interaction as a game between rational players who pursue their self-interest and arrive at an equilibrium. The second part of this course presents evidence that actual behavior often deviates from the standard model. Individuals make mistakes, they learn from others, they follow social norms about fairness and reciprocity, they care for the well-being of others (but can also envy others), they are concerned about their image, and they are driven by emotions. The second part of the course shows how standard game theory can be adjusted to better capture actual behavior, and discusses applications in areas such as price competition, wage bargaining, charitable giving, cooperation in teams, incentives and control, sustainable behavior, and support for redistribution.

Aims:
In this course, you will:
* Learn about the strengths and the weaknesses of the "rational choice" model.
* Learn how deviations form rationality are often rooted in psychology.
* Learn basic behavioral models regarding decision making under risk, time and uncertainty.* Learn how people behave in social and strategic decision situations.
* Learn when and how people deviate from the predictions of the standard game-theoretical model, and how these deviations are rooted in psychology.
* Learn to work with alternative behavioral models, how to apply these models in various fields, and how to use them for better advice.
* Learn how behavioral economics can help solve societal problems.

Methods:
Interactive lectures, student presentations and tutorials