APPLIES TO ACADEMIC YEAR 2015/2016

GRA 2245 Economic Psychology

Responsible for the course
Laura E Mercer Traavik, Miha Skerlavaj

Department
Department of Leadership and Organizational Behaviour

Term
According to study plan

ECTS Credits
6

Language of instruction
English

Introduction

Economic decisions are ubiquitous and interwoven into many of our everyday experiences and especially in the context of work. We can define an economic decision as any decision related to the expenditure and saving of time, money and effort. For example, behaviors like negotiation, choice behavior, work effort, or knowledge sharing. All these behaviors occur in a social context.

In traditional economics it is assumed that people’s actions are fuelled only by self interest, that they make rational decisions which maximize their utility, and that context is hardly relevant. This economic thinking has affected organizational theory and research for decades. Newer research in behavioral economics and finance, and economic and neuropsychology paint a very different picture. The social nature of human beings, the hardwiring of the brain, and the critical importance of context makes the assumptions of many microeconomic models incorrect and/or incomplete. People are not "homo economicus", they can operate with both self and other-interest simultaneously; people are human and fundamentally social and connected to one another.

Economic predictions fail to explain why we give money to a charity, value fairness over outcomes, walk away from a profitable deal, or why we help a co-worker. Economic psychology aims to describe, predict and explain the actual economic behavior of individuals, and groups.

In this course we focus on the psychological evidence that demonstrates the social and connected nature of work relations, and apply this specifically to interdependent decision situations- negotiations, groups, and social relationships at work. Throughout the course we demonstrate the applicability of psychological research for understanding and predicting economic behaviors. We take the students through theory, empirical evidence and their own experiences and assumptions

We begin the course with an overview and trends within economic psychology, and then we examine problems with the core assumption of self interest in the standard economic model. The third section of the course focuses on the work context examining interdependent decisions situations (e.g. negotiation) and relational basis of organizing.

Learning outcome
By the end of the course the student should be able to:
1.Describe and give a brief overview of the field of economic psychology.
2.Critically present evidence of social connectedness and explain how this research can improve the standard economic model.
3.Describe the models and research on interdependent decision making and link this to both psychological and economic models and theories.
4.Analyze the social context at work in terms of cooperation and contribution as well as provide recommendations for fostering it.
5.Develop a skill set that utilizes modern research findings of economic psychology to improve decision making at work.
6.Show how the content of this course can improve individual and management decision making and behavior, and identify potential ethical dilemmas in the application of this knowledge.

Prerequisites
GRA 2204 Judgment and Desicion Making or equivalent
GRA 2205 Organizational Behaviour or equivalent
All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have spesific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.

Compulsory reading

Collection of articles:
2015. Current topics in economic psychology - a collection of research articles will be made available before the course starts. Will continue with the updated articles, but will replace (general) text book with some excellent recent research from Journal of Organizational Behaviour, Journal of Economic Psychology, Science, Psychological Bulletin, Journal of Personality and Social Psychology, Annual Review of Psychology.



Other:
During the course there may be hand-outs and other material on additional topics relevant for the course and the examination.


Recommended reading
Books:
Bazerman, Max H. 1999. Smart money decisions : why you do what you do with money (and how to change for the better). John Wiley & Sons
Thaler, Richard H. 1994. The winner's curse : paradoxes and anomalies of economic life. Princeton University Press
Thaler, Richard H., Cass R. Sunstein. 2009. Nudge : improving decisions about health, wealth, and happiness. Rev. and expanded ed.. Penguin Books

Course outline
· Introduction to economic psychology
· The fallacy of self interest only: social connectedness
· Interdependent decision making
· Economic decisions and social relations in the work context
· Summary and applications

Computer-based tools
Not applicable

Learning process and workload
The course is structured as a combination of lectures, discussions, and compulsory in-class activities. A course of 6 ECTS credits corresponds to a workload of 160-180 hours.

Please note that it is the student’s own responsibility to obtain any information provided in class that is not included on the course homepage/It's learning or text book.

Examination
The course grade will be based on the following activities and weights:
10% - In-class participation
30% - two in-class written hand-ins based on class activity
60% - Term paper (groups of 2-3 students)