Behavioral and Experimental Economics

Bachelor 2021/2022

Type: Elective course (HSE/NES Programme in Economics)

Area of studies: Economics

Delivered by: Department of Applied Economics

Where: Faculty of Economic Sciences

When: 4 year, 1, 2 module

Mode of studies: offline

Open to: students of one campus

Instructors: Pyotr Evdokimov

Language: English

ECTS credits: 6

Contact hours: 64

Full Syllabus

Abstract

Experimental economics is the branch of economics concerned with testing economic theory using controlled experiments. This methodology was introduced in the 1960s by Vernon Smith, who used it to study behavior in markets. Beginning in the 1970s, experimental methods were increasingly used by psychologists such as Kahneman and Tversky to point out behavior at odds with the standard economic model, and this work came to be known as behavioral economics. This course will teach you about behavioral and experimental economics through the lens of experiments on strategic behavior (game theory) and individual decision making (decision theory). The first half of this course will focus on individual decisions. Here, we will learn about how people form beliefs and how they deal with uncertainty. We will look at a number of research papers, including classic work of Kahneman and Tversky and more recent developments, e.g. on how non-standard data such as response times can be used to shed light on the decision-making process. The second half of this course will focus on game theory experiments. First, we will discuss “traditional” game theory experiments testing the validity of different equilibrium concepts, studying how well agents coordinate, and so on. Because to see how well game theory does in the lab, one first has to understand the theory, we will spend some time reviewing the theoretical fundamentals, such as Nash Equilibrum, subgame perfection, etc. Second, we will see how game theory experiments can be used to shed light on preferences for altruism, trust, and other important drivers of human behavior which standard economic courses do not cover.

Learning Objectives

This course will teach students about behavioral and experimental economics through the lens of experiments on strategic behavior (game theory) and individual decision making (decision theory).

Expected Learning Outcomes

Has a good sense of where the field is today
Understands and critically evaluates the results of economic experiments

Course Contents

Introduction
Levels of reasoning
Nash Equilibrium
Prosocial behavior
Prospect Theory
Thinking Fast and Slow
Anomalies

Assessment Elements

Participation in classroom experiments, including those based on the final assignment
Home assignment
Final group assignment

Interim Assessment

2021/2022 2nd module
0.4 * Home assignment + 0.3 * Final group assignment + 0.3 * Participation in classroom experiments, including those based on the final assignment

Bibliography

Recommended Core Bibliography

Alvin E. Roth, V. Prasnikar, M. Okuno-Fujiwara, & S. Zamir. (1998). Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study. Levine’s Working Paper Archive. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.cla.levarc.344
Andrei Shleifer. (2012). Psychologists at the Gate: A Review of Daniel Kahneman’s Thinking, Fast and Slow. Journal of Economic Literature, (4), 1080. https://doi.org/10.1257/jel.50.4.1080
Charness, G. B., & Dufwenberg, M. (2006). Promises & Partnership. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.E1070900
Daniel Kahneman, & Amos Tversky. (1979). Prospect theory: An analysis of decision under risk. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.8AB1AB05
Forsythe Robert, Horowitz Joel L., Savin N. E., & Sefton Martin. (1994). Fairness in Simple Bargaining Experiments. Games and Economic Behavior, (3), 347. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.gamebe.v6y1994i3p347.369
Hertwig, R., & Ortmann, A. (2012). Experimental practices in economics: A methodological challenge for psychologists? Germany, Europe. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.16E792A
J. B. Van Huyck, R. C. Battalio, & R. O. Beil. (2010). Tacit coordination games, strategic uncertainty, and coordination failure. Levine’s Working Paper Archive. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.cla.levarc.661465000000000393
James Andreoni, & John H Miller. (1997). Rational Cooperation in the finitely repeated prisoner’s dilemma: experimental evidence. Levine’s Working Paper Archive. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.cla.levarc.670
Jason Dana, Roberto Weber, & Jason Kuang. (2007). Exploiting moral wiggle room: experiments demonstrating an illusory preference for fairness. Economic Theory, (1), 67. https://doi.org/10.1007/s00199-006-0153-z
Rabin, M. (2002). A Perspective on Psychology and Economics. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.5E7712BD

Recommended Additional Bibliography

Andreas Blume, & Andreas Ortmann. (2007). The effects of costless pre-play communication: Experimental evidence from games with Pareto-ranked equilibria. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.C0E69B00
Hoffman Elizabeth, McCabe Kevin, Shachat Keith, & Smith Vernon. (1994). Preferences, Property Rights, and Anonymity in Bargaining Games. Games and Economic Behavior, (3), 346. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.gamebe.v7y1994i3p346.380
Todd L. Cherry, Peter Frykblom, & Jason F. Shogren. (2002). Hardnose the Dictator. Working Papers. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.apl.wpaper.02.06

Course Syllabus