PROFILGRUPPE (SPECIALTY) PSYCHOECONOMICS

B.Sc. Economics, University of Cologne

Starting October 2013

The homo oeconomicus postulated in neoclassical economics is just a simplification. In reality, humans are only boundedly rational, and economics is not the only science studying human behavior. This specialty combines insights and methods from psychology, modern behavioral economics, and classical decision theory in order to develop a realistic picture of how human decision makers make economic decisions. The lecture "Behavioral Decision Theory" conveys the basic concepts in this interdisciplinary research field and depicts theoretic and experimental results from both economics and psychology. It includes an introduction in neuroscientific methods (neuroeconomics). The lecture "Psychological Foundations of Economic Decision Making" is conceived as a deeper look at the psychological components of economic decisions. The seminar "Topics in Psychoeconomics" covers recent experimental work from behavioral economics and psychology ("judgment and decision making") of special relevance for economic decision making.

Students will learn which psychological phenomena influence actual economic decisions and keep decision makers away from the full rationality of the homo oeconomicus. They will also learn which are the consequences of these phenomena. The lecture(s) and the seminar allow students to develop the necessary skills to tackle questions in decision and behavior theory. A further specialization is possible within the framework of a Bachelor Thesis.

Courses

Behavioral Decision Theory

Offered every WS

Credits: 6

Content:
This course presents a modern introduction to decision making and decision theory. We will discuss behavioral (experimental) evidence of decision biases and heuristics in economic frameworks, real-world examples of actual decision-making by individuals, firms, and organizations, and formal models of decision-making from both economics and psychology. The course will also include an overview of recent neuroscientific evidence on decision making. The course concentrates on individual decision-making (as opposed to group decisions or strategic decision-making, i.e. games). Topics are as follows:

  1. Normative vs. Descriptive Decision Theory
  2. Expected Utility and Subjective Expected Utility
  3. Framing, the Endowment Effect, and Other Problems
  4. Decisions Under Risk and Prospect Theory
  5. Intertemporal Decisions and Quasihyperbolic Discounting
  6. Preference Reversals
  7. Ambiguity
  8. Neuroeconomics

Seminar: Topics in PsychoEconomics

Offered every SS

Credits: 6

Content:
This seminar will cover experimental papers. We will discuss recent developments in (behavioral) decision and game theory relevant to economics, with a special emphasis on the psychological foundations of rational or boundedly rational behavior. The general aim is to understand how human decision makers depart from economic rationality. This semester, we will concentrate on the following topics: (1) why monetary incentives do not always work, (2) how overconfidence affects performance, (3) whether there are gender differences in performance, and (4) the interaction of social preferences with incentives, emotions, and gender.

Psychological Foundations of Economic Decision Making

Offered every SS

Credits: 6

Contents:

This course presents topics from the intersection of judgment and decision making and social and motivation psychology: How do individuals come to their judgments and decisions? Which biases result from the psychological processes underlying decision making? In which way do emotions and moods influence decisions? How does personality come into play? Do individuals make decisions which increase their happiness? Why can monetary incentives be detrimental to decision making? How can choices alter preferences? How do decision makers deceive themselves? Are decisions made by groups better than decisions made by individuals? The course will also provide some background on social psychological research methods and statistical methods. The topics covered in the course are as follows:

1. Heuristics in judgment and decision making
2. Dual-process models
3. Temptation and self-control
4. Biases in information processing
5. Preferences and attitudes
6. Self-serving biases
7. The role of emotions
8. Motivation and happiness
9. Social influences and decision making in groups