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Syllabus: Behavioral Economics
& Strategy
Yale School of Management, Fall 2008
Professor M.
Keith Chen
Office: 55 Hillhouse Room 201
Office Phone: 432-6049
Assistant: Marry Ellen Nichols, 432-3955
Office hours: Thursdays, 1:00 to 2:00 or by appointment. |
Schedule: 2 units
Tuesday & Thursday, 10:00 - 11:20, A60
TA: Lisa Schilling
Office hours: Tuesdays, 2:30 to 3:30 or by appointment.
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Books for Behavioral Economics
& Strategy:
There are two books for this course
in which there will be required reading, and two very good
reference books that
I suggest and will have available for borrowing in my office.
Buying all four books would be bit much, but these are all books
I think you will enjoy having; I also don't mind if you share,
and encourage
you to shop for them used / online (their pictures are links
to the books on Amazon.)
Of the suggested books, the
first is fantastic, with many of the
older and seminal papers in behavioral economics, while the
required "Advances" book focuses
on more recent work. The
second is
an incredible reference for understanding biases and the social
psychology of judgment & decision making but is a bit overwhelming
to read straight through and so is optional; buy this if you
really want to delve into the social psychology of judgment under
uncertainty. Amazon
now lets you browse through the table of contents and excerpts
of these books, click the author or the book cover to take a
look.
You can also search several other used book sites by going to isbn.nu.
Grading:
Two-thirds of student grades will
be determined by performance
on a short-answer final exam, date TBA. The other third will
be determined by class participation as judged by the TA and the
instructor.
Class Schedule:
Note: Class schedule may be rearranged
in order to accommodate guest speakers
| Tue Oct 28: |
Course
Overview and Approach |
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Today's Agenda:
The uses of classic economic analysis
When rationality goes wrong: integrating psychological observations.
Introducing my research
Course structure, presentations and grading
Office Hours and TA |
| Thu Oct 30: |
Extra Class: Elections, Poltical Parties and Voter Biases |
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| Tue Nov 4: |
Extra Class: Elections, Poltical Parties and Voter Biases |
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| Thu Nov 6: |
Risk
Preferences |
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Readings for Today:
Advances in Behavioral Economics, Chapters 4 & 5: "Developments
in Nonexpected-Utility Theory: The Hunt for a Descriptive Theory of Choice
under Risk" by Chris Starmer and "Prospect
Theory in the Wild: Evidence from the Field" by Colin F. Camerer
Optional:
Rabin, Diminishing
Marginal Utility of Wealth Cannot Explain Risk Aversion |
| Tue Nov 11: |
Fairness
and Social Preferences |
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Readings for Today:
Advances in Behavioral Economics, Chapters 8: Fairness
as a Constraint on Profit Seeking: Entitlements in the Market by Daniel Kahneman, Jack L Knetsch,
and Richard H Thaler
The Winner's Curse, Chapter 4
Optional:
Advances in Behavioral Economics, Chapters 9 & 10 (skim
these) A
Theory of Fairness, Competition, and Cooperation by Ernst Fehr and Klaus M Schmidt; Incorporating
Fairness into Game Theory and Economics by Matthew Rabin |
| Thu Nov 13: |
Reference Dependance, Framing,
Mental Accounting and Choice-Bracketing |
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Readings for Today:
Advances in Behavioral Economics, Chapter 2: "Experimental
Tests of the Endowment Effect and the Coase Theorem"
The Winner's Curse, Chapter 6
Advances in Behavioral Economics, Chapter 3: Mental
Accounting Matters by
Richard H Thaler
The Winner's Curse, Chapter 7
Optional:
Advances in Behavioral Economics, Chapter 14: Mental Accounting,
Saving, and Self-Control by Hersh M Shefrin
and Richard H Thaler
The Winner's Curse, Chapter 9 |
| Tue Nov 18: |
Hedonics and
Mis-Prediction of Preferences |
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Readings for Today:
Loewenstein, O'Donoghue & Rabin, Projection
Bias in Predicting Preferences, Quarterly Journal of Economics,
2003
Medvec, Madley & Gilovich, Counterfactual
Thinking & Satisfaction, Journal of Personality and Social Psych,
1995
Optional:
Choices Values and Frames, Chapter 37 (Experienced
Utility) |
| Thu Nov 20: |
Present-Biased
Preferences |
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Readings for Today:
Advances in Behavioral Economics, Chapter 6
The Winner's Curse, Chapter 8 |
| Tue Nov 25: |
Present-Biased
Preferences II |
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Readings for Today:
Advances in Behavioral Economics, Chapter 15
O'Donoghue Rabin, Doing
it Now or Later, American Economic Review, 2001
Optional:
Angeletos, Labison, Et Al, The
Hyperbolic Consumption Model: Calibration, JEP 2001 |
| Tue Dec 2: |
Biases
in Belief Formation |
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Readings for Today:
Rabin Schrag, First
Impressions Matter: A Model of Confirmatory Bias, Quarterly Journal of Economics, 1999
Kahneman Lovallo, Timid
Choices & Bold Forecasts, Management Science, 1993
Sherman & Cohen, Self-Affirmation
and Defensive Biases, Current Directions in Psychological Science, 2002
Gilovich, Differential
Construal and False Consensus, Journal of Personality and Social Psychology,
1990 |
| Thu Dec 4: |
Applications:
Behavioral Negotiations |
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Readings for Today:
Farber & Bazerman, Divergent
Expectations & Disagreement, The Quarterly Journal
of Economics, 1989
Babcock Wang & Loewenstein, Choosing
the Wrong Pond, The Quarterly Journal of Economics 1996
Pogarsky & Babcock, Motivated
Anchoring and Bargaining Impasse, The Journal of Legal Studies, 2001
Robinson Keltner Ward and Ross, Naive
Realism in Intergroup Conflict, Journal of Personality and
Social Psychology 1995
Optional:
Lesson on the Ultimatum
game from Professor Nalebuff's life: "The
Sophisticates Abroad".
Wolfers, Divorce
Laws and Divorce Rates, Working Paper, 2003 |
| Tue Dec 9: |
Applications:
Labor Economics |
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Readings for Today:
Advances in Behavioral Economics, Chapters 18 & 21
The Winner's Curse, Chapter 4
Optional:
Advances in Behavioral Economics, Chapter 20 |
| Thu Dec 11: |
Applications:
Industrial Organization |
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Readings for Today:
Oster & Scott Morton, Magazine
Subscription Prices, The BE Journals in Economic
Analysis & Policy, 2005
Mullainthan & Schleifer, The
Market for News, Working Paper, 2004
Optional:
Della Vigna & Malmendier, Contract
Design and Self-Control, The Quarterly Journal
of Economics, 2004
This paper has three sections, the second of which is very technical. Read
sections one and three, then read section two only if you have experience
with formal modeling. |
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