Behavioral economics and negotiation

Day 1: Behavioral economics and behavioral biases 

• Homo economicus vs real human being – are people rational? What does it mean to be rational?
• Loss aversion – why do losses loom larger than gains?
• Risk perception - choosing and helping consumers with risk
• Perception of time – Are 100DKK today worthy as much as 100DKK tomorrow?
• How to partition payment streams and how to set prices – application of the above-mentioned topics

•  Emotions and consumer choices – the role of affect
• Salience – attention to attributes of a good (such as price and quality)
• Temptation and self-control – can we say no?
• Defaults – how to avoid choosing
• Nudging – how to gently influence consumer decision
• Experts VS novices – Are experts as good as they think?

• Other regarding preferences – generosity, envy
• Perception of fairness – what is fair?
• Reciprocity – what is reciprocation and when should we reciprocate?
• Libertarian paternalism – how to influence choice allowing for individual freedom

• Being strategic in competitive contexts
• Avoiding common biases
• Solving disputes when emotional peers are involved
• Create the proper environment for negotiation
• Design and execute agreements maximizing values
• Appropriate sharing of the value created 

• To select, discuss, and apply theories, models, and methods to develop solutions to strategic problems involving behavioral biases
• To reflect on suggested solutions, based on the proposed literature
• To create innovative solutions to problems related to own working environment, using the tools provided during the course

Evaluation

Grade 12 is awarded for an examination where:

• The student demonstrates a highly in-depth and comprehensive understanding of behavioral economics biases, as well as of the theories, models, and methods to address them
• The student can, independently and in a highly structured and in-depth manner, analyze concrete problems from a behavioral economics perspective
• The student can, independently and in a highly structured and in-depth manner, refer to theories, models, and methods in order to devise innovative solutions to concrete problems where behavioral biases arise

Grade 02 is given to the minimum fulfilment of the course goals: 

• The student demonstrates a barely-acceptable understanding of behavioral economics biases, as well as of the theories, models, and methods to address them
• The student demonstrates an insufficient and unstructured, yet barely-acceptable, analysis of concrete problems from a behavioral economics perspective
• The student develops an insufficient and unstructured, yet barely-acceptable, solution to concrete problems from a behavioral economics perspective

• Behavior under risk and uncertainty
• Behavior under various types of psychological biases
• Behavior under social/peer pressure

• Apply methods and models of behavioral economics and behavioral game theory to specific problems
• Assess and design solutions to strategic problems similar/related to the examples seen in class, taking into account behavioral biases

• Assess and design innovative solutions to own strategic problems, taking into account behavioral biase

4 lecture days (7,5 lecture hours each) during the semester. 

The teaching language is English.

The students’ own work efforts (guideline) equal 27 hours per ECTS credit point. In total 135 hours in this course. The hours are distributed between preparation and class attendance, preparation for the exam, and the exam itself.

The 135 work hours are distributed in the following way:

Lectures: 30

Preparation for lectures: app. 65 hours

Preparation for and the exam itself: app. 40 hours.