First cycle
degree courses
Second cycle
degree courses
Single cycle
degree courses
School of Economics and Political Science
Course unit
ECM0013169, A.A. 2017/18

Information concerning the students who enrolled in A.Y. 2016/17

Information on the course unit
Degree course Second cycle degree in
EC1935, Degree course structure A.Y. 2014/15, A.Y. 2017/18
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Degree course track ECONOMICS AND PUBLIC FINANCE [002PD]
Number of ECTS credits allocated 6.0
Type of assessment Mark
Course unit English denomination BEHAVIORAL ECONOMICS
Department of reference Department of Economics and Management
Mandatory attendance No
Language of instruction English

Teacher in charge OTTORINO CHILLEMI SECS-P/01

ECTS: details
Type Scientific-Disciplinary Sector Credits allocated
Educational activities in elective or integrative disciplines SECS-P/01 Political Economy 6.0

Mode of delivery (when and how)
Period First semester
Year 2nd Year
Teaching method frontal

Organisation of didactics
Type of hours Credits Hours of
Hours of
Individual study
Lecture 6.0 42 108.0 No turn

Start of activities 02/10/2017
End of activities 19/01/2018

Prerequisites: A basic knowledge of microeconomic theory and calculus is required.
Target skills and knowledge: This course will provide an overview of some fundamental models, study how they have performed in different empirical applications and experiments, and how they have been enriched to better fit the data. The aim of the course is to develop the student’s ability to understand under what conditions a standard model can be applied and how it can be modified to better fit a specific situation.
Examination methods: Grading for the class will be based on students’ individual presentation (50%) and a written exam (50%)
Assessment criteria: Evaluation of students' ability in understanding the theoretical contributions presented during the course and in presenting a research paper on this topic
Course unit contents: First we study the principal-agent model. The predictions of the standard model are proved accurate in some cases and less accurate in other cases. We will see that models which include mutual monitoring and social preferences (inequality aversion, reciprocity, altruism)have proved particularly useful in the case of team production. Next, we study the standard model of auctions and reverse auctions (procurement). A practical problem in procurement is cost overrun. We will examine how the problem has been addressed and the empirical evidence for the case of Italy. Finally, we study the voluntary provision of public goods both under 'rational' preferences and social preferences. If time remains, we will discuss the theme of fairness in organizations.

A tentative reading list follows:
1. Performance incentives and team production
Milgrom P. and J. Roberts 1992. Economics, Organization and Management, Cap. 6 and 7.
Lazear E., "Performance Pay and Productivity" The American Economic Review,Vol.90,No.5.(Dec.,2000),pp.1346-1361.
Knez M. and Duncan Simester, "Firm-Wide Incentives and Mutual Monitoring at Continental Airlines", Journal of Labor Economics,2001,vol.19,no.4
Paarsch, Harry J. and Bruce S. Shearer: "The Response to Incentives and Contractual Efficiency: Evidence from a Field Experiment" European Economic Review, 53 (2009), 481-494.
2. Auctions and Procurement
Klemperer, P. 2000. “What Really Matters in Auction Design,” mimeograph, Nuffield College, Oxford University, Oxford, UK.
Klemperer “The Product-Mix Auction: a New Auction Design for Differentiated Goods” Journal of the European Economic Association, 2010, 8, 526-36.
Dufwenberg M., Uri Gneezy “Information disclosure in auctions: an experiment” Journal of Economic Behavior & Organization Vol. 48 (2002) 431–444.
Bucciol A., O. Chillemi and G. Palazzi (2013), "Cost Overrun and Auction Format in Small Size Public Works" European Journal of Political Economy, 30.
3. Social preferences
Inequity aversion
Fehr, E. and Schmidt, K.M. 1999. "A Theory of Fairness, Competition, and Cooperation", Quarterly Journal of Economics 114(3): 817–868.
Charness, G., and M. Rabin. 2002. "Understanding Social Preferences with Simple Tests", Quarterly Journal of Economics 117(3): 817–869.
4. Performance incentives and social preferences
Akerlof, G.A. 1982 "Labor Contracts as a Partial Gift Exchange", in Quarterly Journal of Economics,97, n.4.
Rotemberg,J. 1994 "Human Relations in the Workplace" J. Political Economy 102,684–717
Chillemi, O. 2008 "Competitive versus collective incentive pay: does workers’ mutual concern matter?" EconomicTheory 35:175–186
Chillemi O., B. Gui, "Uninformed Customers and Nonproft Organizations: Modelling Contract Failure Theory",Economics Letters,1,1991.
5. Procedural Justice
Blader, S. & Tyler, T.R. (2003). What constitutes fairness in work settings? A four-component
model of procedural justice. Human Resource Management Review, 12, 107-126.
Planned learning activities and teaching methods: Lectures and students' individual presentations
Additional notes about suggested reading: There is no required textbook for this class. Slides for the lectures will be posted on the website of the course.
Textbooks (and optional supplementary readings)