Behavioral Economics
renginnar@gmail.com
Content
Objective
The course aims to drive a perspective beyond classical economic theories to examine the psychological, cognitive, and social factors shaping real-world decisions of individuals and markets, and to understand decision-making processes under certainty, risk, and uncertainty through a behavioral perspective.
Course Content
Introduction: Origins and methods of behavioral economics.
Chapter I (Choice under Certainty): Preferences, rationality, indifference, utility, opportunity cost, sunk costs, loss aversion, and anchoring and adjustment.
Chapter II (Judgement under Risk and Uncertainty): Fundamentals of probability theory, conditional probability, Bayes' rule, and cognitive heuristics/fallacies (gambler's fallacy, base-rate neglect, confirmation bias, availability, overconfidence).
Chapter III (Choice under Risk and Uncertainty): Expected value, expected utility, attitudes towards risk, framing effects, mental accounting, and probability weighting.
Chapter IV (Intertemporal Choice): Interest rates, exponential and hyperbolic discounting, misprediction and miswanting.
Chapter V (Strategic Interaction): Social preferences, intentions, reciprocity, trust, and limited strategic thinking.
Chapter VI Behavioral insights in public policies (nudges and ethics).
Course Learning Outcomes
Understanding why individuals deviate from classical rationality assumptions when making economic decisions.
Analyzing individual decision-making mechanisms under risk, uncertainty, and intertemporal choice conditions.
Explaining the economic implications of cognitive biases such as framing, loss aversion, and overconfidence. Evaluating social preferences and strategic interactions and policy implicatipons.
Teaching and Learning Methods
Theoretical lectures, case discussions.
Student presentations, simple experiment designs, and synthesis essays.
References
Agner, Erik (2016), A course in Behavioral Economics, Second Edition, Palgrave Macmillan.
Thaler, Richard H and Ganser, LJ (2015), Misbehaving : The making of behavioral economics,
WW Norton New York.
Wilkinson, Nick and Klaes, Matthias (2012), An introduction to behavioral economics, Macmillan
International Higher Education.
Weekly Contents
| Week | Weekly Contents |
|---|---|
| 1 | General Introduction: The origins and methods of behavioral economics |
| 2 | Beyond Homo Economicus: Bounded rationality and judgment heuristics |
| 3 | Choice under Certainty: Preferences, rationality, and indifference |
| 4 | Choice under Certainty: Opportunity costs, sunk costs, and loss aversion |
| 5 | Judgment under Risk and Uncertainty: Fundamentals of probability, Bayes' rule, and cognitive fallacies (gambler's fallacy, base-rate neglect) |
| 6 | Judgment under Risk and Uncertainty: Availability heuristics, overconfidence, and framing effects |
| 7 | Mid-term examinations |
| 8 | Choice under Risk and Uncertainty: Expected value, expected utility, and attitudes towards risk |
| 9 | Choice under Risk and Uncertainty: Choice anomalies (Allais and Ellsberg paradoxes, probability weighting) |
| 10 | Intertemporal Choice: Interest rates, exponential discounting, and its limitations |
| 11 | Intertemporal Choice: Hyperbolic discounting, temporal myopia, misprediction, and miswanting |
| 12 | Social Interactions and social preferences (altruism, inequity aversion) |
| 13 | Social Interactions: Intentions, reciprocity, trust, and limited strategic thinking |
| 14 | Behavioral insights in public policies (nudges and ethics) |
| Week | Weekly Contents |
|---|---|
| 1 | Examples and discussions:The origins and methods of behavioral economics |
| 2 | Examples and discussions: Bounded rationality and judgment heuristics |
| 3 | Examples and discussions: Choice under Certainty |
| 4 | Examples and discussions: Opportunity costs, sunk costs, and loss aversion |
| 5 | Examples and discussions: Judgment under Risk and Uncertainty |
| 6 | Examples and discussions: Availability heuristics, overconfidence, and framing effects |
| 7 | Mid-term examinations |
| 8 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
| 9 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
| 10 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
| 11 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
| 12 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
| 13 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
| 14 | Students present pioneering research on the week's topic. This is followed by simple experiments and related discussions |
Assessment System
| Activities | Number | Contribution |
|---|---|---|
| Contribution of in-term studies to overall grade | 1 | 50 |
| Contribution of final exam to overall grade | 1 | 50 |
| Total | 2 | 100 |
| Activities | Number | Contribution |
|---|---|---|
| Assignments | 0 | 0 |
| Presentation | 1 | 0 |
| Midterm Examinations (including preparation) | 1 | 0 |
| Project | 0 | 0 |
| Laboratory | 0 | 0 |
| Other Applications | 0 | 0 |
| Quiz | 0 | 0 |
| Term Paper/ Project | 1 | 0 |
| Portfolio Study | 0 | 0 |
| Reports | 0 | 0 |
| Learning Diary | 0 | 0 |
| Thesis/ Project | 0 | 0 |
| Seminar | 0 | 0 |
| Other | 0 | 0 |
| Make-up | 0 | 0 |
| Total | 3 | 0 |
Relation of Proficiency
| No | Program Learning Outcomes | Contribution | ||||
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | ||
| 1 | Demonstrate a basic knowledge of different economic theories and main discussions driving current theoretical approaches | X | ||||
| 2 | Demonstrate ability to use basic qualitative and quantitative methods to asses different economic questions of applied fields | X | ||||
| 3 | Show a sound understanding of current economic discussions and problems | X | ||||
| 4 | Have an effective and clear communication in written and oral formats in different public and professional contexts. | X | ||||
| 5 | Demonstrate basic knowledge of the world economic history and a sound knowledge of the Turkish economic history | |||||
| 7 | Demonstrate knowledge of standard quantitative techniques and empirical models used in economics | X | ||||
| 8 | Show ability to apply basic economic theory to an applied topic | X | ||||
| 9 | Show a basic understanding of analytical methods, both theory- and model-based | X | ||||
| 10 | Show ability to use economic concepts to discuss current economic issues | X | ||||
| 11 | Reason logically and work analytically | X | ||||
| 12 | Show awareness on social aspects of the economics in different applied and theoretical fields | X | ||||
| 13 | Identify appropriate economic models to analyse problems | X | ||||
| 16 | Show understanding of basic statistical and econometric concepts and ability to apply basic concepts to own empirical work | X | ||||
| 17 | Demonstrate a sound knowledge of the current economic issues in Turkey and a general knowledge of the issues in the world economy | X | ||||
ECTS
| Activities | Number | Period | Total Workload |
|---|---|---|---|
| Class Hours | 1 | 3 | 3 |
| Working Hours out of Class | 1 | 2 | 2 |
| Assignments | 0 | 0 | 0 |
| Presentation | 1 | 6 | 6 |
| Midterm Examinations (including preparation) | 1 | 7 | 7 |
| Project | 0 | 0 | 0 |
| Laboratory | 0 | 0 | 0 |
| Other Applications | 1 | 2 | 2 |
| Final Examinations (including preparation) | 1 | 2 | 2 |
| Quiz | 0 | 0 | 0 |
| Term Paper/ Project | 1 | 3 | 3 |
| Portfolio Study | 0 | 0 | 0 |
| Reports | 0 | 0 | 0 |
| Learning Diary | 0 | 0 | 0 |
| Thesis/ Project | 0 | 0 | 0 |
| Seminar | 0 | 0 | 0 |
| Other | 0 | 0 | 0 |
| Make-up | 0 | 0 | 0 |
| Yıl Sonu | 0 | 0 | 0 |
| Hazırlık Yıl Sonu | 0 | 0 | 0 |
| Hazırlık Bütünleme | 0 | 0 | 0 |
| Total Workload | 25 | ||
| Total Workload / 25 | 1.00 | ||
| Credits ECTS | 1 | ||