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Summary; the psychology of economics
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The Psychology of Economics,Lecture 1: Introduction to psychology of economics
Economics consists of;
- risk
- utility
- gains & losses
- probability
- beliefs
Psychology consists of;
- cognitive processes
- mental representations
- individual differences
- personality traits
- attitudes
Economic psychology; combination of economics and psychology
- Behavioral economics
- Judgement and decision making
Normative theories; This is how mathematically speaking you should use these theories
(rational)
- Expected value theory; states that people maximize their expected value. So in
decisions under uncertainty, people will choose the option with the higher expected
value.
- Xi = how much do i like this outcome
- P = what is the probability of the outcome
- game theory; outcome depends on behavior of the other person
- People will be selfish and will maximize their own outcomes. These are social
dilemmas; cheating, avoiding tax, etc.
Based on these normative theories, the homo economicus was founded. Economist have
relied on these assumptions;
1. people have well defined and stable preferences
2. people choose in accordance with their preferences
3. people hold accurate beliefs and expectations
4. people are not influenced by irrelevant factors
5. people maximize their own outcomes
However since the 60’s there is a new goal; understanding how people actually make choices
Descriptive theories: how people actually make decisions.
- Kahneman & Tversky: Heuristics & biases program
, - Biases are adaptive in some situations as well
Focus in this course:
1. theory; learn about theories and findings, and write a research report
2. practice; apply theories and findings, complete a case study
Additional readings are for presentation; hand in presentation day before thursday meeting.
- pitch, Q&A, paper presentation
- check schedule (19 okt)
Quizzed: op donderdag, op canvas tussen 15.00 en 18.00
Research paper:
- analyze data and write research paper (2200 words max)(zelf kiezen) (26 okt)
- Gambler's fallacy
- Wisdom of the crowd effect
- Framing effects
EFGH, Focus on case paper first, and second focus on tasks you haven’t completed yet
Meeting 2:
1. watch presentation
2. Q&A
3. Discuss readings of the week\
JASP
, Articles
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