Economics: Behavioural Economics and Finance

Standard economic theory assumes that people make well-informed and rational decisions. Yet empirical evidence suggests that these assumptions do not describe the real world very well.

Most humans are overconfident and rely on simple decision rules rather than rational optimisation, leading to mistakes that may have large consequences. What you will see in this course is that many of these mistakes are predictable and repeatable. This allows us to build alternative models incorporating these mistakes, which is useful both to understand mistakes we may make ourselves (e.g., by not investing in the stock market) and the mistakes made by others.

If you are a curious students who is eager to learn more about how economic decision making really works in practice, this course is for you.

You will get brief refreshers on standard theories of economic decisions, such as expected utility theory and then discuss the various predictable ways in which people tend to violate these theories.

As a final step, you will encounter and discuss alternative models developed by behavioural economists that can explain these violations. In so doing, we cover classic behavioural economic theories such as mental accounting, heuristics and biases, prospect theory, and present bias. You will also learn about more modern alternative theories such as salience theory, cognitive uncertainty and nudging.

Course syllabus

The syllabus contains the formal and legal details of the entire course. It’s a legal document outlining the course structure and requirements, intended mainly for administrative use.

Course literature

The course literature listed may be updated up to eight weeks before the course begins.

The main body of this course consists of a series of lectures. During the lectures, you will be guided through the course material, which includes both a textbook and several additional readings. The lectures cover new examples and act as a guide to solving some of the more technical problems. You will get further opportunities to practice the technical problems in support lessons that are taught by a teaching assistant.

Assessment is in three main ways. The first is a in-person hand-written final exam. The second consists of two problem sets, which are like mini exams that you hand in during the course. The third is a group project in which you are asked to apply your knowledge of behavioural economics to a practical application (such as fixing train delays in southern Sweden). In addition to handing in a written essay, you will be asked to present the results in front of the class.

Entry requirements

Students admitted to the Master programme in Economics and who have taken a course in intermediate microeconomic analysis are qualified for this course. For other students at least 90 ECTS-credits in economics at the undergraduate level are needed for admission to all master courses in economics. To be admitted to this particular course these credits must include a course in intermediate microeconomic analysis (e.g. NEKG21).

Selection criteria

Seats are allocated according to: ECTS (HPAV): 100 %.

Tuition fees for non-EU/EEA citizens

Citizens of countries outside:

• The European Union (EU)
• The European Economic Area (EEA) and
• Switzerland

are required to pay tuition fees. You pay an instalment of the tuition fee in advance of each
semester.

Tuition fees, payments and exemptions

Full programme/course tuition fee: SEK 18,750
First payment: SEK 18,750

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Note that you may also need to pay an application fee, or provide proof of exemption.

Application fee

No tuition fees for citizens of the EU, EEA and Switzerland

There are no tuition fees for citizens of the European Union (EU), the European Economic Area (EEA) and Switzerland.