Behavioural Economics

This short course will survey the key findings of behavioural economics and explain how they relate to day-to-day management. Participants will receive a thorough understanding of how economic insights for decision making can be augmented with experimental economics.

The course will be interactive with numerous examples and opportunities to apply the concepts discussed.

After this lecture you should be able to: Apply a range of examples of behavioural anomalies to real business situations. Understand behavioural anomalies in light of an ecologically rational framework.

Pre reading: “Sun: A CEO’s Last Stand”, Business Week, July 26th 2004 (£)

Overview:

Additional content: Efficient Market Hypothesis* and Business Plan Ecology (and Capital Theory)

Recommended books:

  • Poundstone, William (2010) Priceless: The Hidden Psychology Of Value Oneworld
  • Kahneman, Daniel (2011) Thinking, Fast and Slow Farrar Straus and Giroux

Recommended articles:

  • Lambert, Craig “The Marketplace of Perceptions”, Harvard Magazine, March-April 2006 – A summary of chief insights from behavioural economics and neuroeconomics
  • Poundstone, W., (2011) “Prospect Theory” (Chapter 16) and “Ultimatum Game” (chapter 18) from Priceless: The Hidden Psychology of Value, One World – Good introductions to key concepts
  • Tabarrok, A., “A Phool and His Money” Review of PHISHING FOR PHOOLS: The Economics of Manipulation and Deception, by George A. Akerlof and Robert Shiller, Princeton University Press – A defence of standard economic theory against behavioural claims
  • Manne, H.G., (2005) “Insider trading: Hayek, virtual markets, and the dog that did not bark”, Journal of Corporation Law 31(1):167-185 – A defense of insider trading from the perspective of internal markets and corporate information flows
  • Smith, V. L. (2002) “Constructivist and Ecological Rationality in Economics” Nobel Prize Lecture – An explanation of the difference between constructivist and ecological rationality