Full course description
The traditional model of the homo economicus is ubiquitous in microeconomic theory. Economic agents are assumed to be rational utility maximisers with self-regarding preferences and unlimited processing capacities. Common sense and the results of economic experiments show that this is not always the case. Often people behave differently than predicted by theory. In this course, we will deal with the following problem statements:
- When does microeconomic theory apply and when does it lose its predictive power?
- If it does not apply, what concepts and models can be use to either extend or to substitute the current theory in order to describe human behaviour?
Specifically, we will discuss the following issues:
- Non-expected utility theory
- Intertemporal choice
- Social preferences
- Levels of analytical reasoning
- The role of mistakes
In addition, we will touch on the following topics:
- Mental accounting
The goal of the course is to provide the students with the necessary sensitivity when applying theoretical models. After the course students should be able to identify the most important reasons why humans deviate from behaviour predicted by the commonly used model of the homo oeconomicus. Moreover they should be able to understand formal modelling of deviant behaviour.
- Ability to think analytically
- Basic game theory is not necessary but helpful: simple equilibrium concepts such as (pure and mixed strategy) Nash equilibrium and subgame perfect Nash equilibrium.
- Exchange students need to major in Economics
An advanced level of English
There is not one textbook that will cover the course. References and papers will be made available to the students at the beginning of the course.