ECC2600 - Behavioural economics - 2017

The unit covers the intersection of economics and psychology. The unifying theme is the role of "rationality" with respect to four behavioural clusters: temptations (over-eating); habits of thought (stereotyping); framing effects (is a pay raise too little given the expectation?); and motivational effects (persistence in the pursuit of a career or an ideology). The unit contrasts expected utility theory and its alternative and draws examples from behavioural finance (e.g. the equity premium puzzle which is about the lower than expected prices of financial assets) and from law (e.g. cheating in cooperative efforts). The unit includes laboratory contact hours for behavioural economics experiments.

The learning goals associated with this unit are to:

1. identify rational choice and deviations from rationality such as temptations, self-deception, superstitions, and conspiracy theories.
2. understand habit-governed behaviour and cognitive illusions such as stereotyping.
3. appreciate why perspective (framing) matters in understanding how people assess gains or losses, along the clich of whether a glass is half-empty or half-full.
4. appreciate why motivation (when framing is infused with a goal) matters in understanding tenacity in the pursuit of a goal, which may shed light on career commitment, ambition, entrepreneurship, and why historical costs (sunk cost) matter.
5. explain puzzles in behavioural finance (e.g., equity premium puzzle and the volatility puzzle) and the origin of legal rules concerning equality.

Within semester assessment: 50% + Examination: 50%

Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study. Independent study may include associated readings, assessment and preparation for scheduled activities. The unit requires on average three/four hours of scheduled activities per week. Scheduled activities may include a combination of teacher directed learning, peer directed learning and online engagement.

See also Unit timetable information

Associate Professor Elias Khalil

ECC1000

MGC2600