Behavioral Economics Course

During my PhD I had the chance to tutor and assist with lectures in a variety of courses related to Economics, ranging from Introduction to Microeconomics to Advanced Econometrics. Nonetheless, it wasn’t until the winter semester of 2021 that I got to prepare lectures and teach Behavioral Economics, the course that my academic education had mostly focused on.

Teaching a course that is so close to your heart can be a double edged sword. On the one hand, it can be a lot of fun. Breaking down the fundamental principles of this discipline for Bachelor students with little to no experience with this material took me back to my Masters year in the University of Amsterdam, when I was sitting on the receiving end of the lecture slides; what a truly exhilarating period that was!

On the other hand, preparing material on topics so close to my field of research can also be challenging. I almost feel like if I knew less on a given topic my task would have been much easier as it would be significantly less challenging to paint the broader picture with a collection of intriguing stylised facts. But, having delved into these topics a bit more, the intriguing and easily digestible message can rarely be served without “a grain of salt”… Take for example the famous Marshmallow experiment (funny demonstration). It’s so tempting to simply claim that kids’ ability to suppress temptation predicts economic success later in life; no ‘if, buts or maybes‘. But, if we take into account children’s socio-economic background, then maybe… (you can read more on this here). Threading the needdle between enough detail to preserve academic integrity but not too much so that students don’t lose interest can be challenging. And doing that for the first time, amidst a global pandemic that forces all lectures to be delivered online does not help either…

Fortunately, in this endeavour I had the help of Sebastian J. Goerg. Together we coordinated the course of Behavioral Economics that was offered jointly between TUM’s Munich and Straubing campuses. We spent hours on end discussing the optimal way to organise material as well as setting up other resources (such as classroom online experiments) that help keeping students engaged with the material.

My ambition is to keep on building and improving upon these slides over the next years. Below, you can find a brief summary of each week’s theme as well as a link to the corresponding Lecture slides (in PDF format). Lectures 1-7 focus on individual decision making while 8-10 on interaction with others. Feel free to reach out and send your comments. Your feedback would be greatly appreciated and most likely find its way in one of the future iterations of these slides 🙂

Lecture 1

An overview of Behavioral Economics history coupled with a few class experiments (Slides: TUMCS_BE_Lecture_1).

Lecture 2

An overview of Experimental Economics (Slides: available upon request) and a guide on how to conduct an Experiment in Economics (Slides: HowTo_ExEc_OK).

Lecture 3

A brief brush-up of the standard Micro-economic methods to Consumer Theory (Slides: Lecture_BE_3).

Lecture 4

In this lecture we introduce the notion of Reference Dependence and how it challenges standard Economic assumptions (Slides: Available upon request).

Lecture 5

We introduce Expected Utility Theory, the standard Economics model for studying decisions under uncertainty (Slides: Lecture_BE_5_EU).

Lecture 6

We extend the standard model for decisions under uncertainty to non-Expected Utility models. We focus on rank-dependent models (such as Prospect Theory and Cumulative Prospect Theory) but also briefly discuss Regret Theory (Slides: Lecture_BE_6_NonEU).

Lecture 7

A brief introduction to inter-temporal choices (choices we make today but bear consequences on multiple future instances).  We discuss Exponential, Hyperbolic and Quasi-hyperbolic discounting (Slides: Available upon request).

Lecture 8

A brief brush-up on some of the fundamental notions of Game Theory (Slides: Lecture_BE_8_GameTheory).

Lecture 9

An introduction to Behavioral Game Theory. We discuss limited strategic thinking and Level-k models, Coordination games and Schelling’s salence as well as Social Dilemmas and social preferences (Slides: Lecture_BE_9_BehavGameTheory).

Lecture 10

More on Behavioral Game Theory: Ultimatum, Dictator and Trust games (Slides:Lecture_BE_10) and a discussion on Nudges (Slides: Available upon request).

Advanced Seminar Economics & Policy : Decisions under Uncertainty from Description and from Experience

Since 2021 I have been teaching an Advanced Seminar for MSc students. The topic focuses on the so-called ‘Description – Experience gap’ for decisions under uncertainty. This is a topic that I hold very close to my heart as I worked extensively on it during my PhD thesis.

People very often make decisions under uncertainty regarding future consequences of their actions and their likelihood. Models in Economics typically assume that people have full access to numerical descriptions of such uncertainty. Although this is a reasonable assumption for certain environments (e.g. weather forecasts or certain types of financial decisions) it is less reasonable in most other settings, where people often inform their decisions from past experience. Recently, research in decision theory has demonstrated that the two forms of information: from description and from experience, can lead to very different types of decisions.

I use the notion of this gap to motivate and introduce students to the key concepts of decision theory and the mathematical tools for modelling uncertainty. An overview of the content and slides for this seminar can be found below.

As part of the requirements for this course students worked in small groups with the goal of coming up with a research question – related to the key-concepts and applications of this course – and address it in a theoretical or empirical way. My goal was to simulate – albeit at a smaller scale – the process of developing a thesis, helping thus students develop and sharpen the tools they will later need for their Master’s thesis. I worked closely with these groups and enjoyed the process of developing very interesting research ideas and often testing through mini-experiments. I created a poster with some of the highlights from this work which you can access here.