UniversityECON4260 Lectures 2011

Literature on Topic 1: Behavioral decision theory.
Entries in bold constitute the curriculum.


·  Kahneman, D., J. Knetsch, and R. Thaler (1991).Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias,” Journal of Economic Perspectives, 5, Winter, 193-206. [Read this first]



·         Fehr, E. and J.-R. Tyran (2005): “Individual Irrationality and Aggregate Outcomes”, Journal of Economic Perspectives. 19(4), pp. 43-66. [ 1. Lecture]

·         Plott, C.R. and S. Sunder (1982): “Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models” Journal of Political Economy, 90 (4), pp. 663-698, 1982. [ 1. Lecture]


Expected utility and conjunction fallacy  

·  If you are unfamiliar with expected utility, it may be worth wile reconsider the introductions from standard textbooks. E.g. Varian, H.R. (1992): Microeconomic Analysis (3.ed), Norton. (Chapter 11).

·  Tversky A. and D. Kahneman (1984). “Extensional versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgement," Psychological Review, 91, 293-315. [1. Lecture] 

·  Gigerenzer, G., R. Hertwig, U. Hoffrage, P. Sedlmeier (2008). Cognitive Illusions Reconsidered, Handbook of Experimental Economics Results, Vol.1, Ch 109, 1018-1034. [1. Lecture] 


Prospect theory and endowment

·  Kahneman, D. and A. Tversky (1979). "Prospect Theory: An Analysis of Decision Under Risk," Econometrica, 47, 263-291. [1. og 2. Lecture]

·  Kahneman, D., J. Knetsch, and R. Thaler (1990). "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, 98, 1325-1348. [3. Lecture]

·  Köszegi, B and M. Rabin (2006): A Model of Reference-dependent Preferences, Quarterly Journal of Economics, CXXI. [2. Lecture]

·  Plott, C. R and K. Zeiler (2005). "The Willingness to Pay-Willingness to Accept Gap, the “Endowment Effect,” Subject Misconceptions and Experimental Procedures for Eliciting Values," American Economic Review, 95, 530-545. [3. Lecture]

·  Rabin, Matthew and R. Thaler (2001). "Anomalies: Risk aversion," Journal of Economic Perspectives, 15, 219-232. [3. Lecture]

·  Camerer, C. (2000). "Prospect Theory in the Wild: Evidence from the Field,” in Choices, Values, and Frames, D. Kahneman and A. Tversky, eds., Cambridge University Press and Russell Sage Foundation.

·  Rabin, Matthew (2000). "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, 68, 1281-1292

·  Starmer, C. (2000). "Developments in Nonexpected-Utility Theory: The Hunt for a Descriptive Theory of Choice Under Risk," Journal of Economic Literature, 38; 332-382.


Mental accounting and applications

·  Benartzi, S. and R. Thaler (1995). "Myopic Loss Aversion and the Equity Premium Puzzle," Quarterly Journal of Economics, 110, 73-92. [4. Lecture]

·  Thaler, R. (1999). "Mental Accounting Matters," Journal of Behavioral Decision Making, 12,183-206. [4. Lecture]

·  Thaler, R.H. and C.R. Sunstein (2003): Libertarian Paternalism. The American Economics Review 93 (2), 175-179. [4. Lecture]

·  List, J. (2004). "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, 72, 615-625.

·  Barberis, N., M. Huang, and T. Santos (2001). “Prospect Theory and Asset Prices,” Quarterly Journal of Economics, 116, 1-53.

·  Camerer, C., L. Babcock, G. Loewenstein, and R. Thaler (1997). "Labor Supply of New York City Cabdrivers: One Day at a Time," Quarterly Journal of Economics, 112, 407-443.

·  Prelec, D. and Loewenstein, G. (1998). "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, 17, 4-28.


Last modified: 17 June 2011