Behavioural Game Theory

Term: 
Fall
Credits: 
2.0
Course Description: 

In this course, we will read and discuss papers about the psychological factors that underpin decision-making, focusing on decisions taken when interacting with others.

 

The course will have three parts:

 

  1. An introduction to decision theory and behavioural economics

 

Behavioral game theory is a subfield of behavioral economics, in which behavior is analyzed in terms of the costs and benefits it brings about. We will  dedicate the first sessions to explaining the framework and its key notions, such as ‘bounded rationality’ and ‘cognitive biases’.

 

  1. Studies on other-regarding preferences

 

            We will then look at choices in strategic contexts: that’s where game            theory is relevant, because the benefits of the choices made also depend on what others’ choose. We will see that these decision          depend on social preferences, which we will attempt to specify.

 

  1. Studies on strategic decision making

 

            The decisions taken when interacting with others also depend on how         others are predicted to behave. We will investigate how these       predictions are formed and their effects on decision-making.

Learning Outcomes: 

  

  • Acquaintance with the problems and methods of behavioural economics, especially concerning

-          the study of pro-social motives

-          bounded rationality (biases and adaptive heuristics)

  • Knowledge about how to model decision making in strategic situations.

 

At the end of the course, students should master a number of concepts and models used in decision sciences and game theory, such as ‘preference’, utility function, maximisation of expected utility, and Nash equilibrium. They will know about a number of findings in behavioural economics: the most famous biases, such as the ‘sunk cost fallacy’, and theories of social preferences, such as inequity aversion. Last, they will become familiar with the experimental method used in behavioural economics.

Assessment: 

 

  • A one-page essays: the essays will consist of an empirical hypothesis about motivation and/or cognition at work when taking a decision, and an experimental protocol (or the description of a computer simulation, or a mathematical model) meant to test the hypothesis.

40% of the final grade

  • Some coursework: solving some exercises in decision and game theory.

20% of the final grade.

  • Articles presentations: students will be asked to write hands-out and stimulate discussion during two sessions with discussion format.

20% of the final grade.

  • Participation to the class: students are expected to actively engage with the questions raised in the course, challenge or defend the psychological theories presented in the readings, question the methodology, etc. 

20% of the final grade.

 

 

Homework due: Exercises will be due the week after they are given. The first  essay should be handed in before week 8, and the second essay should be handed in before week 12.

 

Online platform:For reason of convenience, the material of the course will be stored at the URL:

http://christophe.heintz.free.fr/bgt/

 

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