Delivered at:: Department of Theoretical Economics

Course type:: Elective course

When:: 2 year, 3 module

Instructor

Sahoo, Soubhagya

Full Syllabus

Abstract

Experimental economics is a field of economics that aims to study economic behaviors by conducting controlled experiments. It involves setting up a controlled environment to observe how individuals behave under specific conditions and then using this information to test economic theories. Researchers and policymakers can benefit from the findings of experimental economics studies by gaining a deeper understanding of human decision-making, market dynamics, and policy formulation. The course will be in three sections. In the first section, the course will introduce behavioral economics with an overview of essential concepts in this field, such as bounded rationality, social preferences, prospect theory, and heuristics. The second section will cover the methodological foundation of running experiments to study economic behavior. This includes the principles of economics experiments, experimental design, subjects, data analysis, applications of experimental economics, and the ethical considerations involved in conducting experiments with human subjects. In the final section, we will delve deep into different types of field experiments to study preference, market, and discrimination. We will explore the application of field experiments (RCTs) in improving human capital and designing effective social programs.

Learning Objectives

Understand key concepts and theories in Behavioral & Experimental Economics.
Identify and explain some of the ways in which human decision-making is generally not economically rational.
Explain how government policy might be improved using behavioral economic insights.
Explain how experimental methods have contributed to economics.
Explain the overall importance of field experiments to the discipline of economics.

Expected Learning Outcomes

Correlation vs. causation
Challenge of causal identification in social sciences
Selection bias and Randomization
Internal and external validity
Behavioral development economics
Induced value method
House money effect
Subjects of the experiment
Risk behavior in the laboratory
Experimenter demand effect
Bounded rationality
Heuristics and biases
Controlled experiment
Natural experiments
laboratory experiment
Parallelism
Internal vs External validity

Course Contents

Introduction
Methodological Foundations
Causal Inference & RCT
Applications to Development Economics

Assessment Elements

Group presentation
This course is designed to function primarily as a seminar. This approach means there will be minimal lectures, with a greater emphasis on student-led discussions based on assigned readings. A high level of student participation in class is expected. Class time will be dedicated to clarifying and deepening the understanding of the assigned papers and to discuss significant issues. Each group, consisting of three students, will select a specific paper from a provided list and present it in class. The 60-minute presentation should include (1) an overview of the relevant literature, and (2) a detailed discussion of the chosen paper, including its main idea, experimental design, and key findings.
Term paper
Each student is required to submit a term paper by 24th March 2023. The term paper should include: (1) A literature review. (2) A comprehensive review of the presented paper. (3) A proposal for a follow-up or new experiment related to the paper's topic. Note: The term paper must be written independently by each student. Group members should avoid copying from each other and should design unique experiment proposals. You must submit your term paper over Smart LMS and you need not email the same.
Mid-term examination
The mid-term exam will cover all the lectures and the class presentations up to the date of the examination. Date of mid-term examination: 22nd February 2024

Interim Assessment

2023/2024 3rd module
0.4 * Group presentation + 0.3 * Mid-term examination + 0.3 * Term paper

Bibliography

Recommended Core Bibliography

An introduction to behavioral economics, Wilkinson, N., 2012
Duflo, E., & Banerjee, A. (2017). Handbook of Field Experiments. Amsterdam, Netherlands: North Holland. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1145037
Methods in experimental economics : an introduction, Weimann, J., 2019
Mostly harmless econometrics : an empiricist's companion, Angrist, J. D., 2009

Recommended Additional Bibliography

. 2: The handbook of experimental economics, Kagel, J. H., 2015
Causal inference : the mixtape, Cunningham, S., 2021
Mastering 'Metrics : the path from cause to effect, Angrist, J. D., 2015
Nudge : improving decisions about health, wealth and happiness, Thaler, R. H., 2009
Predictably irrational : the hidden forces that shape our decisions, Ariely, D., 2009
The handbook of experimental economics, , 1995

Master’s Programme 'Economics and Economic Policy'

Experimental Economics