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2017/2018  KAN-CPHIO2002U  Behavioural Economics

English Title
Behavioural Economics

Course information

Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Quarter
Start time of the course Third Quarter
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for BSc/MSc in Business Administration and Philosophy, MSc
Course coordinator
  • Thomas Poulsen - Department of Accounting and Auditing (AA)
Main academic disciplines
  • CSR and sustainability
  • Sociology
  • Business psychology
Last updated on 27-06-2017

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • to advance students’ understanding of financial markets by recognizing the biases and errors of judgment to which all of us are prone
  • strengthen the students ability to analyze and manage complex financial decisions
  • strengthen students’ ability to support or assess financial and managerial decision-making in all types of firms and organizations
  • Through various exercises and experiments students will moreover get familiar with their own behavioral profile.
Behavioural Economics:
Exam ECTS 7,5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer
Aids Open book: all written and electronic aids, including internet access
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure

This course provides students with a critical view on financial economics – standard models and assumptions including of course the idea of rational markets – based on what we know about personal and market behavior; it is an introduction to a critique that takes as its premise that financial decision-making and investor behavior are not necessarily driven by rational considerations but by aspects of personal and market psychology.


The purpose of this course is to enable students to understand economic theories of the market in general and financial markets in particular on their own terms while at the same time identifying more philosophical themes related to for example rationality, efficiency, value and pricing inherent in these theories.
This double understanding of markets should enable students not only to reflect critically about mainstream economic theory but also articulate this critique on the terms of economic theory itself. In the wider context of the CM(fil.) master, the idea of this course is to activate philosophical thinking from inside economics rather than the other way around.

Teaching methods
This course begins by reviewing the foundations of modern finance – to make sense of how psychology impacts individuals and markets it is necessary to take this step back –, its inability to account for various paradoxes and anomalies, and the genesis of behavioral finance. Expected utility and market efficiency are the first topics to be covered and discussed. Philosophical themes covered in this part include rationality, utilitarism (ethics), and empiricism (epistemology).

These central theoretical developments have subsequently proved incomplete as individuals’ actual choices violate a number of important assumptions. For example, the assumption of risk aversion proved to be poorly grounded in actual behavior as did market efficiency and the capital assets pricing model. (Social) Psychology provided a number of interesting alternative explanations that naturally call for philosophical scrutiny: Prospect theory, heuristics and biases, overconfidence, and social forces. Philosophical themes include power, emotions and nudging (paternalism).
The final part of the course describes how psychological biases have the potential to impact the behavior of managers. Both the abilities of rational managers to take action when markets are believed to reflect irrationality and the possibility that managers are themselves the source of bias are addressed. Here, the philosophical purpose is to abstract what is valid from all realms. Some 'debiasing' strategies will also be covered.
Feedback during the teaching period
Feedback is, in part, provided on an ongoing basis through Q&A during the lectures. This includes a dedicated Q&A session for exam preparation. Moreover, feedback is provided on the group work and experimental exercises that we do in class. Finally, students are encouraged to make use of office hours.
Student workload
Lectures 33 hours
Exam 4 hours
Preparation 170 hours
Expected literature

Journal acticles and selected book chapters. 

Last updated on 27-06-2017