ABOUT THE COURSE:Behavioral economics is a new way of studying economics where economic decision making has been more humanized which helps us better understand the world around us. It questions some of the assumptions of standard or traditional economics and complement it with concepts borrowed primarily from the domains of psychology. This course introduces important concepts of behavioral economics like mental accounting, prospect theory, present bias, inequality aversion along with the tools used for developing such ideas. Further, it also deals with the applications of these concepts in diverse settings like stock market, health care, auctions etc.INTENDED AUDIENCE: Any UG or PG studentPREREQUISITES: Basic knowledge of economics and mathematics up to 12th standard will be beneficialINDUSTRY SUPPORT: Government organizations like Niti Ayog, academic organizations, financial institutions and marketing/advertising companies look for individuals with expertise in the area of behavioral sciences.

Syllabus

Week 1:Introduction: Introduction to behavioral economics;Relationship with other disciplines; Objectives, scope andstructure
Week 2:Motivation: Hierarchical ordered needs; Need forachievement and the instinct of workmanship; Fashion andstatus; The Diderot effect
Week 3:Methodology: Theories; Evidence; Consilience;Experimental studies of Behavior; Behavioral Rules andRoutines; Computer Simulations; Techniques for uncoveringMeans-End chains
Week 4:Values, Preferences and Choices: Bounded rationality;Broadening rationality; Evolutionary biology andneuroscientific basis of utility; Policy implications

Week 5:Acknowledging problems & accessing options: Theprocess of cognition; Brain plasticity; The failure to meetaspirations; Thinking fast & slow
Week 6:Beliefs, Heuristics and Biases: The standard model; Selfevaluationand projection bias; Causes of irrationality
Week 7:Beliefs, Heuristics and Biases (continued): Deductive andinductive thinking; The economics of dread; The significanceof brands; Elusive optima; Creative thinking
Week 8:Decision-making under risk and uncertainty: Prospecttheory; Loss aversion; Shape of utility function; Decisionweighting; Recent theories
Week 9:Mental accounting: Nature and components; Framing andediting; Budgeting and fungibility; Choice bracketing anddynamics
Week 10:The discounted utility model: Origins and features of theDUM; Methodology; Anomalies of the DUM
Week 11:Alternative intertemporal choice models: Timepreferences and time inconsistent preferences; Hyperbolicdiscounting; More radical models; Empirical evidence andpolicy implications
Week 12:Strategic interaction: Introduction to analytical or standardgame theory; Equilibrium refinements; Types of games andequilibrium; Behavioral vs standard game theory; Iteratedgames; Social preferences; Public good games