Spring 2020, 219B class in Psychology and Economics – Theory




639 Evans Hall
515 Evans Hall
Office Hours: 
Thursday 10-11am and 12.30-1.30 pm

Course Description

This course is the continuation of the 219A class in Psychology and Economics – Theory, taught by Dmitry Taubinsky. As in 219A, we will keep emphasizing the psychological evidence as the basis for sound economic analysis. We will also insist on the importance of neoclassical theory as a successful benchmark that you are required to know. Finally, several topics of this course are designed to be the empirical counterpart of the theory covered in 219A. There are two main differences between 219A and 219B. First, this class has largely an empirical orientation, as opposed to the mostly theoretical orientation of 219B. I will present empirical papers drawn from a variety of fields (here in alphabetical order): asset pricing, corporate finance, consumption, development economics, environmental economics, health economics, industrial organization, labor economics, political economy, and public economics. As such, the class is also meant for applied students that do not intend to make Psychology and Economics one of their main fields, but want to apply a behavioral idea to their field of interest. The second main feature of the course will be its emphasis on dissertation writing. Throughout the course I will do my best to point out what seem to me like good directions for research in behavioral economics. In addition, as an incentive to get you started, one of the requirements of the course is a paper on an applied topic using field data. The 219B course also covers a set of Methodological Topics, including some of the how-to-do list for empirical behavioral research. In particular we are going to emphasize the theme of Structural Behavioral Economics, or model-based empirical research in behavioral economics. The methodological topics are integrated with the other research topics.  

Problem Sets and Answers

Exercise on Present Bias and Retirement Savings

Lecture Notes

1. Introduction 2. Psychology and Economics: The Topics 3. Psychology and Economics by Field 4. Methodology: Reading the Psychology Journals 5. Defaults and Retirement Savings: The Facts 6. Comparison to Effect of Financial Education 7. Default Effects in Other Decisions
1. Default Effects and Present Bias 2. Default Effects: Alternative Explanations 3. Present Bias and Consumption 4. Investment Goods: Homework 5. Investment Goods: Exercise 6. Investment Goods: Job Search 7. Investment Goods: Work Effort
1. Investment Goods: Delay with Deadline 2. Leisure Goods: Credit Card Borrowing 3. Leisure Goods: Consumption and Savings 4. Leisure Goods: Commitment and Savings 5. Leisure Goods: Drinking 6. Methodology: Commitment Field Experiments
1. Laboratory Experiments on Present Bias 2. Methodology: Errors in Applying Present-Biased Preferences 3. Reference Dependence: Introduction 4. Methodology: Bunching-Based Evidence of Reference Dependence 5. Reference Dependence: Tax Elusion 6. Reference Dependence: Property Tax Protests 7. Reference Dependence: Goals 8. Reference Dependence: Mergers 9. Reference Dependence: Golf
1. Reference Dependence: Housing 2. Reference Dependence: Non-Bunching Papers 3. Reference Dependence: Labor Supply 4. Reference Dependence: Employment and Effort 5. Reference Dependence: Job Search
1. Reference Dependence: Full Prospect Theory 2. Reference Dependence: Insurance 3. Reference Dependence: Finance 4. Reference Points: Forward vs. Backward Looking 5. Reference Dependence: Domestic Violence 6. Reference Dependence: Endowment Effort 7. Reference Dependence-KR: Effort 8. Social Preferences Wave I: Altruism 9. Workplace Effort: Altruism
1.Shaping Social Preferences 2. Social Preferences Wave II: Warm Glow and Charitable Giving 3. Social Preferences Wave III: Inequity Aversion and Reciprocity 4. Workplace Effort: Inequity Aversion 5. Methodology: Field Experiments 6 .Social Preference Wave III: Reciprocity and Gift Exchange 7. Gift Exchange: Workplace
1. Gift Exchange: Workplace II 2. Gift Exchange: Charitable Giving 3. Social Preferences Wave IV: Social Pressure, Signaling, Social Norms, Honesty 4. Social Pressure: Various 5. Social Pressure: Charitable Giving 6. Social Signaling
1. Social Norms 2. Non-Standard Beliefs 3. Overconfidence 4. Law of Small Numbers 5. Projection Bias 6. Non-Standard Decision-Making 7. Attention: Introduction 8. Attention: Simple Model
1. Attention: eBay Auctions 2. Attention: Taxes 3. Attention: Left Digits 4. Attention: Financial Markets 5. Attention: Wrap Up 6. Framing 7. Menu Effects: Introduction 8. Menu Effects: Choice Avoidance 9. Menu Effects: Preference for Familiar 10. Menu Effects: Preference for Salient 11. Menu Effects: Confusion
1. Choice of Dominated Options 2. Memory 3. Mental Accounting 4. Persuasion 5. Emotions: Mood 6. Emotions: Arousal 7. Happiness
1. The Fields: Introduction 2. Behavioral IO: Behavioral Consumers 3. Behavioral IO: Behavioral Firms 4. Methodology: Markets and Non-Standard Behavior 5. Behavioral Political Economy
1. Methodology: Structural Behavioral Economics 2. Behavioral Finance 3. Behavioral Corporate Finance 4. Behavioral Labor 5. Behavioral Development
1. Behavioral Health Economics 2. Behavioral Energy Economics 3. Behavioral Public Economics 4. Concluding Remarks 5. Teaching Evaluation