A Practicum in Behavioral Economics This Book's Approach

THIS BOOK APPROACH This book approach is premised on a simple assumption because behavioral economics is foremost a field of scientific inquiry that evolves according to experimental outcomes and practical , applications of the knowledge garnered from these outcomes , so too should students learn . Studying and practicing behavioral economics should occur simultaneously , which , in turn , suggests a course taught more according to a practicum approach than in a traditionally styled lecture format . As such , the books information and lessons are presented in a succinct and precise format . The goal of this textbook is to help students experience behavioral economics through actual participation in the same experiments and economic games that have served as the foundations for , and shaped the contours of , the field . With the help of this book , students have the opportunity to learn behavioral economics firsthand and , in the process , create their own data and experiences . They will learn about how they make private and public choices under experimental the same time as they learn about the field of behavioral economics itself . They will be both the BEHAVIORAL ECONOMICS

subjects and students of behavioral economics . What better way to learn ?

HOMO HOMO SAPIENS For ease of reference and exposition , we henceforth refer to the type of individual construed by the traditional model as Homo , a peculiar subspecies of human beings that is unfailingly omniscient , dispassionate , and when it comes to making choices . Homo sapiens , on the other hand , represents the rest of and competitors who are prone to making decisions based primarily on emotion . 12 and . is Latin for economic man ( 1995 ) traces its use back to the late when it was used by critics ofjohn Stuart Mill Work on political economy . In contrast ( and , as We will see , with no small touch of irony ) Homo sapiens is Latin for wise . We have all heard the saying that words The titles and descriptions We use to distinguish people and their behaviors ( Homo Homo sapiens ) can reinforce or diminish behaviors such as pride in cultural heritage , respect for the living world , and trust in community , a process known as crowding out of intrinsic motivation and commitment . As an example of this phenomenon , Bauer et al . 2012 ) asked participants in an online survey to imagine themselves as one of four households facing a water shortage due to a drought affecting their shared Well . The survey assigned the label consumers to half of the participants and individuals to the other half . Those imagining themselves as consumers reported feeling less personal responsibility to reduce their water demand , and less trust in others to do the same , than did those referred to as individuals . As We are about to learn , behavioral economics is all about exposing these types of framing effects existing in the real world inhabited by Homo sapiens . BEHAVIORAL ECONOMICS PRACTICUM

THE TEXTBOOK DIFFERENT SECTIONS The textbook consists of four sections that , taken together , portray in full the eclectic comprising the field of behavioral economics . Sections and present the thought and actual laboratory experiments that have formed key pillars of the field , such as those experiments depicted in Examples and above . The thought experiments in Section are , for the most part , of the simple cognitive tests devised by psychologists and economists over the past decades to illustrate the fallacies , miscalculations , and biases distinguishing Homo sapiens from Homo . Similarly , the laboratory experiments presented in Section are , for the most part , of the seminal experiments conducted by and ( among many others ) These experiments helped motivate the revised theories of human choice behavior , such as and ( 1979 ) Prospect Theory , which form another pillar of behavioral economics . Alongside these experiments , Section presents the revised theories of human choice behavior with varying degrees of rigor . This is where the theoretical bases of Homo rational choice behavior are examined , and where key refinements to this theory are refinements underpinning the myriad departures from rational choice behavior We witness Homo sapiens make in this section laboratory and field experiments ( and which are examined further in Sections and ) Section the student in the world of behavioral game theory . Here we explore games such as Ultimatum Bargaining presented in Example . We ARTHUR

follow ( 2003 ) lead , first by characterizing the games analytically ( identifying solution , or equilibrium , concepts that are predicted to result when members of Homo play the games ) and then by discussing empirical results obtained from corresponding field experiments conducted with Homo sapiens . It is within the context of these games and field experiments that theories of social interaction are tested concerning inter alia trust and trustworthiness , honesty , fairness , reciprocity , etc . As with the thought and laboratory experiments presented in Sections and , the games and field experiments presented in Section are meant to be replicated with students as subjects and the instructor as the experimenter , or researcher . Finally , Section wades into the vast sea of empirical research and choice architecture . Here the student explores studies reporting on ( the outcomes of actual policy nudges , such as the SMarT plan presented in Example , analyses of secondary to test for choice behavior consistent with the revised theories discussed in Section , such as the test for loss aversion in Example , and ( analyses of primary obtained from novel field experiments to further test the revised theories . The main purpose of this section is not only to introduce the student to interesting empirical studies and policy adaptations in the field of behavioral economics , but also , in the process , to incubate in the student an abiding appreciation for the obscure settings that sometimes lend themselves to such . Our approach to studying behavioral economics is focused on the underlying laboratory experimentation and behavioral games that form the bedrock of the field . As such , we eschew delving into related fields such as and auction theory . See Cartwright BEHAVIORAL ECONOMICS PRACTICUM

THE TEXTBOOK DIFFERENT LEVELS OF RIGOR Because the mathematical and computational rigor of material presented in this textbook varies throughout , particularly in Sections , the extent of the rigor used in the presentation of a given topic is indicated with . Topics without a superscript are considered basic and universal enough that backgrounds in economics , mathematics , or statistics are not required for the reader to understand the material . Topics with a single asterisk ( indicate that higher mathematical reasoning skills are recommended for the reader to fully grasp the material . Topics with a double asterisk ) indicate that either higher economic or statistical reasoning skills , whichever the case may be , are recommended . And lastly , topics with the dreaded triple asterisk ( indicate that both higher statistical and mathematical computational skills are likely required to fully grasp the material . Both students and instructors should bear these indicators in mind . For example , none of the topics presented in Section are , implying that students from varied academic backgrounds should be able to fully understand the material presented . Single ( first appear in Section , Chapter , indicating that the discussions of the Principle and Additional Rationality Axioms pertaining to Homo will likely be more easily comprehended by students with higher mathematical reasoning skills . The double asterisk appears later in the same chapter when the topic of Homo and the ( 2018 ) and just ( 2013 ) for introductions to the former and latter fields , respectively . ARTHUR

expected utility form is presented , and the triple asterisk first appears at the end of Chapter , the topic of choice . THINKING For those who prefer thinking , the figure below illustrates how these four sections relate to , and help define , what we thus far understand to be the field of behavioral economics . Show where . am and me Chance Economics Show where game and theory The two boxes with arrows pointing inward toward Behavioral Economics can be thought of as the inputs to our understanding of the field . The box enclosing the statement , Show where standard economic theory fails represents Section of the guidebook , and adjust the theory pertains to Section . The box enclosing the statement , Show where analytical game theory fails and adjust the theory represents Section . In contrast , the two boxes with arrows pointing outward from Behavioral Economics can be thought of as outputs in the sense of Choice Architecture ( the SMarT plan described in Example ) and interesting empirical studies ( the study described in Example ) These two areas of interest are explored in Section . BEHAVIORAL ECONOMICS PRACTICUM

THE TEXTBOOK APPENDICES Appendix A at the end of the book includes example Response Cards for the experiments and games presented in Sections . I am when it comes to collecting student print out a response card for each student for each experiment or game , have the students fill in their responses , and then pass around a collection box for each student to place his or her card in . Student ID numbers on the response cards could be their names or their university ID numbers . Or , if you wish to align the students responses with more demographic information obtained from a survey instrument administered on the first day of class , you might consider randomly assigning the students individual course identification ( CID ) numbers on the first day of class . The CID numbers would not be tied to the students names or their university identification numbers . In this case , in order to preserve their anonymity , you would be precluded from basing the students course grades upon their performance in the experiments or their responses to the survey instrument . Appendix includes a copy of a survey that could be administered to students the first day of class , after having randomly assigned their CID numbers . This information would be useful when it comes to analyzing the data obtained from the experiments and games . Again , because the surveys are linked to CID numbers rather than student names or university identification numbers , student anonymity regarding the survey instrument is ensured . Appendix includes examples of presentation slides ARTHUR

used for lectures and as guides for the experiments and games as students proceed to participate in them . Appendix includes examples of course outlines designed for courses targeting economics and economics majors , respectively . And a Linkages Matrix is provided in Appendix This matrix provides a structure for identifying connections between the various concepts presented in Chapters and the experiments , games , and empirical studies discussed in Chapter and later in Section . Media Figure ( Introduction ) Arthur is licensed under a BY Attribution license BEHAVIORAL ECONOMICS PRACTICUM