Learning outcomes of the course unit
At the of the course, the student:
-knows the main economic theories proposed to explain real world consumer behaviour.
- knows how managers and firms can use behavioural economics to develop their marketing strategies.
Basic knowledge of microeconomic theory.
Course contents summary
The aim of this course is to introduce students to the recent literature in behavioural economics, with a specific attention on consumer and firm behaviour, a subfield known as behavioural industrial organization. The emphasis will be put on experimental evidence, economic and psychological intuition and marketing and managerial applications, and NOT on microeconomic theory or mathematics per se.
1) Introduction to behavioural economics: i) what it ii) what is its method.
2) Consumer behaviour:
- From rational man to bounded rationality.
- Rational choice without and with risk and uncertainty
- Rational intertemporal choices
- Cognitive biases and rationality violations in economic settings: theories and examples.
3) Firm behaviour.
3a) Firms facing rational consumers:
i) Optimal pricing (linear and nonlinear) in monopolistic and competitive settings.
ii) Product differentation (vertical and horizontal).
3b) Firms facing "irrational" consumers
i) Optimal pricing: add-on pricing; the impact of overconfidence; the impact of consumer inertia.
II) Product differentiation: spurious product differentiation and marketing effort.
4) Consumer policy when consumers are boundedly rational.
- Edward Cartwright, Behavioural Economics, Routledge 2018.
- Luis Cabral, Introduction to Industrial Organization, MIT Press, Ltd 2017.
Older editions of these books will be fine as well.
Slides, made available to students before class, are also compulsory material.
Additional readings, both compusory and optional, will be communicated at the beginning of the course.
Most lessons will take the form of frontal lectures in which students will be exposed to theories, experimental evidence and managerial applications. For a few selected topics, students will be involved in classroom games played via the platform https://economics-games.com/
Assessment methods and criteria
A written exam will be used to evaluate the skills and the critical abilities developed by the students as regards to the theories and notion explained during lectures. The exam will last 90 minutes, and will be composed of three open questions (divided in subpoints). Students participating to classroom games will get up to two extra-points conditional on writing a short essay (max two pages), in which student elaborates on his/her own behaviour during the game.