Class Strategic and Behavioral Economics

This course has two main objectives: 1^st to better explore the instruments that are made available by Game theory; 2^nd to present the main concepts of the modern behavioural theories.

Regarding our 1^st objective, we aim to further develop the concepts that were introduced in Industrial organization broadening the application of the Game Theory instruments.

In relation to the 2^nd objective, we will introduce the basic concepts of the economic behavioural theory confronting the studies with its different application regarding the decision of consumers, firms and governments.

1.   Introduction to strategic behaviour

1.1.     Economic decision

1.2.     Individual decisions and strategy

1.3.     Optimization and rational behaviour

1.4.     Behavioural limits to rationality

2.   Introduction to Game Theory

2.1.     Structure and rules

2.2.     Games

3.   Static games and equilibrium

3.1.     Strategic representation of a game

3.2.     Games with pure strategies

3.3.     Games with mixed strategies

3.4.     Games with continuous strategies:

4.   Sequential Games

4.1.     Game three

4.2.     Dynamic games, repetition and reputation

4.3.     Market applications

5.   Games with imperfect information

5.1.     Moral Hazard

5.2.     Adverse selection

6.   Rationality and behaviour

6.1.     Two decisions processes

6.2.     Bounded rationality and heuristics

7.   Preferences, risk and time

7.1.     The preferences and decision

7.2.     Decision and risk

7.3.     Behaviour on the short and the long run

Use of case studies for class discussion.

Students are encouraged, through examples, to establish a relationship between theoretical principles and reality.

Varian, Hal (2019), Intermediate Microeconomics: A Modern Approach, 9th ed., W W Norton & Co

Fiani, Ronaldo (2015), Teoria dos Jogos Com aplicações em Economia, Administração e Ciências Sociais (4ª Edição), Elsevier

Dhami, Sanjit (2016), The Foundations of Behavioral Economic Analysis, Oxford University Press

Kahneman, Daniel (2014), Pensar, Depressa e Devagar, Temas e Debates

Rasmussen, Eric (2007), Games and Information, Blackwell Publishing, Oxford, UK 

Gibbons, Robert (1992), A primer in Game Theory, Harvester Wheatsheaf,  UK

Diamond, Peter e Vartiainen, Hannun, ed (2017), Behavioral Economics and Its Applications, Princeton University Press