Behavioral Economics and Consumer Decision Making
This course offers an introduction to behavioral economics and its applications towards theories of consumption. At the end of the course, students will be expected to have learned the fundamentals of the behavioral approach to judgment and decision making and, most importantly, to have learned the tools and acquired the skills necessary to successfully apply behavioral insights in the context of marketing and consumption.
The course is organized in three parts. The first, introductory, module will revolve around the conceptual tools necessary to grasp and master the behavioral approach to economics. In this module we will discuss the main theoretical ideas of behavioral economics, contrasting them with the traditional approach both in the context of choice (prospect theory) and in the context of judgment (heuristics and bias).
In the second part of the course we will discuss the experimental methods adopted in behavioral research, with particular attention to laboratory experiments.
Finally, before the third part of the course, students will be offered a portfolio of topics on which they will build their project work. Topics will include food, health, financial literacy, consumer protection, disclosure, behavioral ethics, corporate governance, sustainability, privacy, risk management; of course, students are also strongly encouraged to come up with their own suggestions based on the relevant literature.
The third part of the course, thus, will offer students the applicative tools necessary to carry out their project. In particular, we will delve into nudge theory, that is, the application of behavioral insights to help people make better decisions.
- Principles of behavioral science and research
- Theory of expected utility and empirical violations to the theory
- Behavioral approach to choice and decision making
- Prospect theory
- Applications of Prospect theory: endowment, default, loss aversion
- Behavioral approach to judgment: Heuristics and bias
- Fast and frugal heuristics; ecological rationality
- Introduction to nudging; the role of context in our choices
- De-biasing and cognitive empowerment
- Ethical aspects in nudging
- Dilip Soman: The Last Mile
Excerpts and suggested readings from:
- Erik Angner: A Course in Behavioral Economics
- Daniel Kahneman: Thinking Fast and Slow
- Richard Thaler and Cass Sunstein: Nudge
- Cass Sunstein: Choosing Not to Choose