Intermediate Microeconomics
preliminary — subject to changes
Important dates:
- September 2nd
- No Class
- October 7th
- No Class
- January 8th, 15:30
- Final exam
Course Description
Optimal economic decision making on the level of individual economic units, in-depth study of (optimal) consumer decision-making, externalities, market failure, and behavioral economics.
Topics include, but are not limited to, choice under certainty, decisions under risk and uncertainty, intertemporal choice, market failure, externalities, and asymmetric information.
Course Objectives
The course will enable students to gain an in-depth understanding of individual decision making in the economy.
Course Materials
Required:
The course will follow:
Angner, E., 2016. A course in behavioral economics. 2nd ed.. Macmillan International Higher Education. [BE]
and
Varian, H.R., 2014. Intermediate microeconomics with calculus. WW Norton & Company. [IM]
The required and recommended readings from these two texts are indictaed below by “BE: chapter” and “IM: chapter”, respectively.
Course Requirements:
Students must read the corresponding chapters of the textbook before each session. Reading the economic and political press will also be helpful.
I recommend that you try to solve the chapter problems in preparation and review of each class session.
Class meets each Monday at 12:15 till 14:45. Please bring a hard copy of the problems we want to discuss (see below) to each class.
Electronic devices, i.e. laptops, are discouraged from use during class sessions. See http://economicscience.net/content/laptop-use/ for the reasons.
Instructor Information:
Prof. Dr. Dennis A. V. Dittrich
dennis.dittrich@touroberlin.de
http://economicscience.net
You can always contact me via email. For meetings in my office appointments can be arranged through the my webpage at: http://economicscience.net/content/book-appointment.
Updated information, links to the literature, additional materials, etc. can be found on my webpage as well.
Grading Guidelines:
Grading Component | Weight |
---|---|
Quizzes & Problem Sets | 50% |
Final Examination | 50% |
Solutions to problem sets must be submitted by the beginning of the respective class. Late submission will lead to a penalty on the grade for the problem sets.
You are allowed to bring a dictionary, a pocket calculator, and a single-sided page DIN A4 with hand-written notes to the final exam.
Workload
A typical 3 credit course requires 150 hours of your time. The table below identifies how I expect those 150 hours will be allocated. While you do not receive direct marks for reading, reading will affect your class participation mark (your ability to participate in class discussions and activities) and your final exam mark.
Activity | Time |
---|---|
Class Time (3 hours / week) | 45 hours |
Reading (3 hours / week) | 45 hours |
Preparation, Problem Sets, and Review (4 hours / week) | 60 hours |
Topics and Reading Assignments
Session 1
- Introduction
- Rational Choice under Certainty
Readings- required: BE: 1 and 2
- recommended: IM: 2–5
Angner & Loewenstein (2012), “Behavioral economics,” in Mäki, ed., Handbook of the Philosophy of Science: Philosophy of Economics, Amsterdam: Elsevier, pp. 641–690
Session 2
- Decision Making under Certainty
Readings- required: BE: 3
- recommended:
Frank (2005), “The Opportunity Cost of Economics Education,” New York Times, Sept. 1, p. C2.
Arkes & Blumer (1985), “The psychology of sunk cost,” Organizational Behavior and Human Decision Processes, 35 (1), 124–140
Huber, Payne, & Puto (1982), “Adding asymmetrically dominated alternatives: Violations of regularity and the similarity hypothesis,” The Journal of Consumer Research, 9(1), 90–98.
Kahneman, Knetsch, & Thaler (1991), “Anomalies: The endowment effect, loss aversion, and status quo bias,” The Journal of Economic Perspectives, 5 (1), 193–206
Section titled “Anchoring and Adjustment” from Tversky & Kahneman (1974), “Judgment under uncertainty: Heuristics and biases,” Science, 185 (4157), 1124–1131
Ariely, Loewenstein, & Prelec (2003), “‘Coherent arbitrariness’: Stable demand curves without stable preferences,” The Quarterly Journal of Economics, 118 (1), 73–105
Session 3
- Probability Judgment
Readings- required: BE: 4
Session 4
- Judgment under Risk and Uncertainty
Readings- required: BE: 5
- recommended:
Keren & Lewis (1994), “The two fallacies of gamblers: Type I and Type II,” Organizational Behavior and Human Decision Processes, 60 (1), 75–89.
Sections titled “Representativeness” and “Availability” from Tversky & Kahneman (1974), op. cit.
Tversky & Kahneman (1983), “Extensional versus intuitive reasoning: The conjunction fallacy in probability judgment,” Psychological Review, 90 (4), 293–315
Bar-Hillel (1980), “The base-rate fallacy in probability judgments,” Acta Psychologica, 44 (3), 211–233
Nickerson (1998), “Confirmation bias: A ubiquitous phenomenon in many guises,” Review of General Psychology, 2 (2), 175–200
Angner (2006), “Economists as experts: Overconfidence in theory and practice,” Journal of Economic Methodology, 13 (1), 1–24.
Session 5
- Rational Choice under Risk and Uncertainty
Readings- required: BE: 6
- recommended: IM: 12
Session 6
- Decision Making under Risk and Uncertainty
Readings- required: BE: 7
- recommended:
Sections I–V of Tversky & Kahneman (1986), “Rational choice and the framing of decisions,” The Journal of Business, 59 (4, Pt. 2), S251-S278
Thaler (1985), “Mental accounting and consumer choice,” Marketing Science, 27 (1), 15–25
English summary of Allais (1953), “Le comportement de l’homme rationnel devant le risque: Critique des postulats et axiomes de l’école americaine,” Econometrica, 21 (4), 503–546
Ellsberg (1961), “Risk, ambiguity, and the Savage axioms,” The Quarterly Journal of Economics, 75 (4), 643–669
Session 7
- The Discounted Utility Model
Readings- required: BE: 8
- recommended:
Frederick, Loewenstein, & O’Donoghue (2002), “Time discounting and time preference: A critical review,” Journal of Economic Literature, 40 (2), 351–401
- Intertemporal Choice
Readings- required: BE: 9
- recommended: IM: 10
Ainslie (1975), “Specious reward: A behavioral theory of impulsiveness and impulse control,” Psychological Bulletin, 82 (4), 463–496
Rabin & O’Donoghue (2000), “The economics of immediate gratification,” Journal of Behavioral Decision Making, 13 (2), 233–250
Loewenstein & Angner (2003), “Predicting and indulging changing preferences,” in Loewenstein, Read, & Baumeister, eds, Time and Decision: Economic and Psychological Perspectives on Intertemporal Choice, New York: Russell Sage Foundation, pp. 351–391
Session 8
- Intertemporal Choice
Session 9
- Game Theory
Readings- required: BE: 10, IM: 29 and 30
Session 10
- Behavioral Game Theory
Readings- required: BE: 11
- recommended:
Chapter 2 and 5 of Camerer (2003), Behavioral Game Theory: Experiments in Strategic Interaction, New York, NY: Russell Sage Foundation
Dawes & Thaler (1988) “Anomalies: Cooperation,” The Journal of Economic Perspectives, 2 (3), 187–97
Session 11
- Exchange
Readings- required: IM: 32 and 33
Session 12
- Welfare
Readings- required: IM: 34 and BE: 12
- recommended:
Loewenstein & Haisley (2008) “The economist as therapist: Methodological ramifications of ‘light’ paternalism,” in Caplin & Schotter, eds, The Foundations of Positive and Normative Economics: A Handbook, New York, NY: Oxford University Press, pp. 210-45
Sunstein (2014), “Nudging: A very short guide,” Journal of Consumer Policy, 37 (4), 583–588.
Loewenstein & Ubel (2010), “Economics Behaving Badly,” New York Times, July 15, A31
Session 13
- Asymmetric Information
Readings- required: IM: 38
Session 14 (January 6th)
Review
Session 15 (January 8th)
Final
Topics and reading assignments are subject to changes.
Problem sets
We will discuss problems – mostly taken from our textbook – in class. You will find the problems for download in a pCloud folder: here.
Upload you solutions to this pCloud folder [Click Here!] Please use PDF or plain text for your uploads, or bring a hard copy to class.
If you do not have a pCloud account yet: Get one for free!