ECON30019 Behavioural Economics
The Complete Exam Bible · S2 2026ECON30019 Overview
- Third-year economics subject
- Twelve weeks of teaching
- Two lectures and one tutorial weekly
- Quizzes run inside lectures
- Three typed assignments
- Closed-book examination hurdle
- No required textbook
ECON30019 Behavioural Economics is a third-year subject in the Department of Economics at The University of Melbourne.
- Assessed by In-lecture quizzes, weekly tutorial participation, three typed assignments and one closed-book examination.
- Watch for The examination is a hurdle: you must pass it to pass the subject, whatever your semester marks.
- Hardest step Deriving under closed-book conditions, where one branch or sign error is the whole question.
- How to prepare Re-derive every worked example on blank paper before you look at any solution.
- Start early on The weekly tutorial problems, attempted before the solutions are released.
How ECON30019 is assessed
| Component | Weight | Format |
|---|---|---|
| Online quizzes | 10% | Short quizzes administered during every lecture, starting with the second lecture in week one. They cannot be completed outside lecture times, and a quiz not completed on time scores zero. Your lowest three quiz marks are dropped, so up to three may be missed without penalty. Hurdle not stated for this task: confirm on the LMS. |
| Tutorial participation | 10% | Weekly from week one, in the tutorial you are enrolled in. The grade combines attendance with participation in the activities your tutor sets, and a missed tutorial scores zero. Your lowest two participation marks are dropped, so up to two may be missed without penalty. Hurdle not stated for this task: confirm on the LMS. |
| Assignment 1 | 10% | Typed answers submitted online through the LMS grading tool as a single file; email and in-person submissions are not accepted. Due at 16:00 with a three-hour grace period to 19:00 on the due date. No extension is permitted and a late submission scores zero. Hurdle not stated for this task: confirm on the LMS. |
| Assignment 2 | 10% | Typed answers submitted online through the LMS grading tool. Due at 16:00 with the same three-hour grace period, no extension permitted, and a late submission scores zero. Solutions are covered in lectures or published on the LMS in the lecture after the due date. Hurdle not stated for this task: confirm on the LMS. |
| Assignment 3 | 10% | Typed answers submitted online through the LMS grading tool, under the same deadline, grace-period and no-extension rules as the earlier two. Hurdle not stated for this task: confirm on the LMS. |
| End of semester examination · hurdle | 50% | During the examination period. Fifteen minutes of reading time plus two hours of writing time, in person, closed book, with a strict time limit. The approved calculator is the Casio FX82, any suffix except the FX8200, and equivalents are not accepted. Hurdle: to pass this subject, students must pass the end of semester examination. |
The six components sum to exactly one hundred, so no weight is missing. Two points are worth separating. The hurdle sits on the examination alone and is stated in the subject's own words: to pass this subject, students must pass the end of semester examination. No hurdle is stated for the other five, so those rows say so rather than asserting that none exists. Separately, the materials give two due dates for the first assignment. The Subject Guide states Thursday 27 August at 16:00 in both its schedule and its assessment table, while the assignment paper itself and the current LMS listing both give Monday 31 August at 4pm. The two live surfaces agree on the later date, so this guide shows it and routes you to the LMS rather than choosing for you.
Current ECON30019 dates
| Date | Item | Control |
|---|---|---|
| 2026-08-31 | Assignment 1 due | 16:00, with a three-hour grace period to 19:00. The assignment paper, the LMS calendar and the LMS listing all give this date; the Subject Guide gives Thursday 27 August instead. Confirm on the LMS. |
| 2026-09-24 | Assignment 2 due | 16:00, with a three-hour grace period to 19:00, as stated in the Subject Guide for this offering. |
| 2026-10-22 | Assignment 3 due | 16:00, with a three-hour grace period to 19:00, as stated in the Subject Guide for this offering. |
Dates are as published in the ECON30019 Subject Guide for Semester 2, 2026, cross-checked against the LMS calendar and the assignment paper. Confirm exact deadlines and submission settings in the live LMS.
What ECON30019 covers
The whole subject in the order it is taught: choice, then beliefs, then risk, then time and other people. Each chapter links to its free guide.
What Behavioural Economics Adds to the Standard Model
Week 1. Normative and descriptive theory, the neoclassical benchmark, how the field produces evidence, sunk cost and escalation, opportunity cost and the income-target result.02Preferences and the Theory of Rational Choice
Week 1. Binary relations, weak and strict preference and indifference, completeness and transitivity, the six derived properties, utility representation on a finite set, ordinality.03Revealed Preference and the Choice Axioms
Week 1. Choice correspondences, Axiom alpha as a contraction condition, Axiom beta as an expansion condition, the two representation theorems, testing a table of observed choices.04Menu Effects: Decoys, Compromise and Deferral
Week 2. Menu dependence, asymmetric dominance, extremeness aversion, choice deferral, constructed preferences and reason-based choice, anchoring and procedure invariance.05Reference Dependence and the Endowment Effect
Week 2. Willingness to accept against willingness to pay, the kinked value function, the loss-aversion coefficient, the two-component reference model, and the counter-evidence.06System 1 and System 2 Thinking
Week 3. The two-process account, cognitive ease and strain, salience and risk substitution, and the separation of bias from noise.07Conditional Probability and Bayesian Updating
Week 3. Risk against uncertainty, the probability axioms, mutual exclusivity against independence, the law of total probability, Bayes' rule and sequential updating.08Representativeness, Small Numbers and Base Rates
Week 4. The gambler's fallacy, the representativeness heuristic, the belief in a law of small numbers, base rates and the false-positive computation.09Confirmation Bias and Biased Belief Updating
Week 4. The washing out of priors, biased search, interpretation and memory, contraposition and the selection task, and a model with signal accuracy and a misreading probability.10Availability, Correlation Neglect and Overconfidence
Week 4. The availability heuristic, correlated signals counted twice, the three-way overconfidence taxonomy, the planning fallacy, and the average against the median.11Expected Value and Expected Utility under Risk
Week 5. Prospects and lotteries, the unbounded-expectation paradox, curvature and risk attitude, certainty equivalent and risk premium, and the two extra axioms.12Framing, the Reflection Effect and Prospect Theory
Week 6. Gain and loss frames, the reflection effect, the S-shaped value function and its parameters, locating the reference point, and field evidence with a fixed reference point.13Bundling, Mental Accounting and Realized Losses
Week 6. Segregate, integrate, cancel and silver lining, fungibility and bracketing, the disposition effect, and realized against paper losses.14Allais, Probability Weighting and Ambiguity Aversion
Weeks 6 to 7. The common-consequence and common-ratio patterns, the certainty effect, decision weights and the fourfold pattern, and known risk against unknown odds.15Intertemporal Choice: Discounting and Present Bias
Weeks 8 and 9. Exponential discounting and stationarity, preference reversal over time, the quasi-hyperbolic form, and naive against sophisticated agents.16Social Preferences and Behavioural Public Policy
Weeks 10 to 12. The self-interest benchmark, simple altruism against inequality aversion, conditional cooperation and punishment, and what a defensible policy intervention requires.It introduces empirical research on economically important patterns of behaviour that break the standard rationality assumptions, together with the theory built to capture those patterns in tractable models.
Most of the semester covers individual decision making, and the subject names temptation and present-biased preferences, prospect theory, reference-dependent preferences and over-confidence among its topics, adding that it may also touch on behavioural public economics.
The teaching order runs from preferences and the theory of rational choice, through beliefs and probability judgement and then choice under risk and uncertainty, into intertemporal choice, social preferences and behavioural public policy.
Assessment has six components that sum to exactly one hundred: online quizzes administered in every lecture (10 per cent, lowest three dropped), weekly tutorial participation (10 per cent, lowest two dropped), three assignments at 10 per cent each, and a two-hour end of semester examination worth 50 per cent with fifteen minutes of reading time.
That examination is in person and closed book, and it carries a hurdle: the subject states that to pass, students must pass the end of semester examination.
The practical consequence shapes how the subject should be studied. Five small components are bankable across the semester, but none of them can rescue a failed paper, and nothing may be carried into the room except the approved calculator, so every definition, derivation and direction has to come from memory.
Two prices for one object, and where the gap comes from
- 1Fix each person's reference point at their own current position. The owner's reference point includes the ticket; the non-owner's does not.
- 1For the owner, giving up the ticket is a movement below the reference point, so the loss branch applies: the magnitude is 2.5 times 80, which is 200.
- 1For the non-owner, not acquiring the ticket is a forgone gain rather than a loss, so the gain branch applies: the magnitude is 1 times 80, which is 80.
- 1Compare. The seller's number exceeds the buyer's by a ratio of 2.5 to 1, which is the wedge between the minimum price the owner will accept and the maximum the non-owner will pay.
- 1Name both ingredients. Reference dependence makes the direction of travel matter at all; loss aversion makes the downward direction count for more. Neither alone produces a gap.
Key terms
- Rational preference relation
- A ranking over alternatives that is complete, so any two alternatives can be compared, and transitive, so the rankings chain. Neither condition says anything about wisdom or self-interest, which is why the word means much less here than in ordinary speech.
- Choice correspondence
- The record of what a decision maker takes from each menu offered. It returns a set rather than a single item so that genuine indifference can be recorded as indifference, and it is the only observable object in the theory of choice.
- Axiom alpha
- Also called independence of irrelevant alternatives. If an item is chosen from a large menu and is still available in a smaller menu contained in it, then it must be chosen from the smaller menu too. The decoy, compromise and deferral effects all violate this condition.
- Reference point
- The position outcomes are measured from, which decides whether a given result counts as a gain or a loss. Candidates include the status quo, past values, aspirations, social comparisons and expectations, and the subject treats how they evolve as an open question.
- Loss aversion
- The finding that people dislike losses more than they like gains of the same size, encoded as a coefficient greater than one on the loss branch of the value function. Reported estimates sit around 2.25 to 2.5.
- Base-rate neglect
- Giving the base rate less weight than it deserves when judging a hypothesis. Given a general figure about a population alongside a detail about one case, attention slides off the general figure and settles on the particular case.
- Certainty equivalent
- The guaranteed amount a person would view as equally desirable as a given gamble. Subtracting it from the gamble's expected value gives the risk premium, whose sign reports the risk attitude directly.
- Independence axiom
- The condition that mixing two ranked lotteries with the same third lottery, at the same probability, preserves the ranking. It is one of the two axioms beyond rationality that expected utility requires, and it is what the classical paradoxes attack.
- Mental accounting
- The process by which individuals code, categorise and evaluate financial events, assigning them to separate accounts that are opened, evaluated and closed. It violates fungibility, since a dollar sitting in one account stops being interchangeable with a dollar in another.
ECON30019 FAQ
What does this subject actually cover, week by week?
Twelve weeks in four blocks. Weeks one and two cover preferences and choice: the theory of rational choice, the choice axioms, menu dependence and the endowment effect. Weeks three and four cover beliefs and probability judgement, from the probability axioms and Bayes' rule through the gambler's fallacy, base-rate neglect, confirmation bias, availability and overconfidence.
Weeks five to seven cover choice under risk and uncertainty, and weeks eight to twelve cover intertemporal choice, social preferences and behavioural public policy.
How is the mark made up, and what is the hurdle?
Six components summing to one hundred: online quizzes at 10 per cent, tutorial participation at 10 per cent, three assignments at 10 per cent each, and the end of semester examination at 50 per cent. The hurdle sits on the examination alone, and the subject states it plainly: to pass this subject, students must pass the end of semester examination. A strong semester of coursework cannot substitute for it.
How many quizzes and tutorials can I miss?
The two allowances are different sizes, which is easy to get wrong. Your lowest three quiz marks are dropped, so up to three quizzes may be missed without penalty. Your lowest two tutorial participation marks are dropped, so up to two tutorials may be missed. Anything not completed scores zero for that item, and the quizzes are administered during lectures and cannot be completed outside lecture times.
What happens if an assignment is late?
Assignments are due at 16:00, and there is a stated three-hour grace period, so anything lodged by 19:00 that day is not penalised. That is a grace period rather than an extension: the subject states that no extension is permitted for assignments and that failing to submit on time results in a mark of zero.
If illness or other serious circumstances affect you, the route is a special consideration application through the University.
What is the examination like, and what may I bring?
Fifteen minutes of reading time followed by two hours of writing time, held in person during the examination period, closed book, with a strict time limit. The approved calculator is the Casio FX82, any suffix except the FX8200, and equivalents are not accepted. Because it is closed book, no formula sheet can be carried in, so definitions and derivations have to be produced from memory.
How much mathematics does this subject involve?
More than the reading suggests. The assessed work is built on short derivations rather than essays: evaluating a piecewise value function at a stated deviation, computing a posterior from a prior and two likelihoods, comparing expected values and then expected utilities under a stated curvature, and solving for a certainty equivalent.
The algebra is never long, which is exactly why a single sign or branch error usually costs the whole item.
Is there a textbook I need to buy?
No. The subject states that there is no required textbook and that it loosely follows Angner, A Course in Behavioral Economics, in any edition, with Cartwright, Chaudhuri and Dhami listed as further reading. In practice the lecture and tutorial materials carry the syllabus, and a textbook serves as a second explanation rather than as a source of examinable content.
What is the single hardest thing to get right?
Direction. The highest-frequency error across the whole subject is a reversed direction rather than a failed method: the value function is convex over losses and concave over gains, a risk-averse person has a concave utility function and a positive risk premium, and people prefer the safe option in a gain frame and the risky option in a loss frame. Each is a one-line check that saves a whole question.
How to study for the exam
Treat this subject as a set of derivations to be produced rather than a catalogue of effects to be recognised, because the examination is closed book and half the mark plus the hurdle sit there. (1) Learn the benchmark before the anomaly in every topic, since almost every question opens by asking what the standard model predicts and why, and that sentence is creditable on its own.
(2) Attempt each tutorial problem before the solutions are released, because that window is the only closed-book practice the semester offers; once you have read a solution, that problem tests recognition rather than recall. (3) Bank the quizzes by attending lectures, and spend the allowance of three dropped quizzes and two dropped tutorials on genuine clashes rather than on a slow start.
(4) Keep a list of your own error types as you practise, sorted into classification, branch, direction and interpretation errors, because that list is far more useful in the last week than a second pass through problems you already solved. (5) Rehearse the four directions that are most often reversed until you can produce each without hesitation.
(6) In the last fortnight, work from blank paper only: write the definition, the formula and the derivation from memory, then check, since anything you can only recognise will not be available in the room.
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