This course will explore ways to integrate insights from psychology into economics by formalizing these insights by extending existing economic models. We will look at two types to enrich classical economic models. First, we will look at a richer set of preferences that people have, such as loss aversion, news utility, and social preferences. Second, we will consider ways in which people misperceive or misoptimize when making decisions – such as narrow bracketing, projection bias, and focusing effects, as well as statistical mistakes people make.
The emphasis of this course is, first and foremost, on how to formalize psychological insights. As such, this course can only be taken for credit for students who have taken (at least) a graduate course in microeconomics (although anyone is welcome to audit the course and participate actively in the classes).
The second goal of the course is to show how these formal models can be applied, the predictions the models make, and the implications they have in important economic settings, ranging from retirement savings and addiction to labor supply and consumption decisions.
This class is aimed at students interested in doing research – whether applied theory (with a strong focus on empirical implementability) or theoretically influenced empirics.
During this course you will:
- learn how to extend the classical economic framework by formally modeling insights from psychology;
- learn how to apply these models to specific contexts to draw out new implications and make precise predictions;
- be exposed to a (small subset) of the frontier of research in behavioral economics;
- gather research ideas; and
- improve how you communicate these ideas and how to write (short, incomplete) research proposals.
- Regular quizzes/exercises: 10%
- 3 problem sets: 10%, 10%, and 20%
- In-class exam: 30%
- Research proposals and ideas: 20%. You will be asked to write down research ideas and write some of them up as 1-page research proposals.
- A graduate course in microeconomics