Experimental and Behavioral Economics

Experimental economics is the application of experimental methods to study economic questions. Economic experiments replicate real-word incentives in a controlled manner and may be conducted in the laboratory, the field or even over the internet. The objective of this course is to test the validity of economic theories, analyse deviations from theoretical predictions and identify patterns of behaviour useful to build new theories. Further, we will review the popular behavioural results obtained in the literature so far.

This course introduces students to the growing field of experimental economics, providing insights into how economic theories can be tested and refined through experiments. It aims to familiarize students with experimental methods and encourage further exploration of this interdisciplinary approach to economic research. The course covers core topics such as behavioral game theory, decision-making under uncertainty, market behavior, and social preferences, while emphasizing the design and implementation of economic experiments. Students will explore the gap between theoretical predictions and observed behavior and learn how economists use laboratory experiments to analyze decision-making processes. Classes will primarily consist of lectures discussing textbook materials and key research studies. Additionally, students will participate in classroom experiments, offering hands-on experience with experimental methods and reinforcing theoretical concepts. The curriculum includes readings, discussions, experimental design projects, and assessments to evaluate understanding and application of the material.

Through this course, students will gain an understanding of:

• CO1: Explain the experimental toolkit used by economists to analyse real-world economic problems. | Bloom level: Understand
• CO2: Explain and compare major experimental paradigms used to study individual and group decision-making. | Bloom level: Understand / Analyse
• CO3: Explain key behavioral theories and apply them to interpret observed departures from standard economic predictions. | Bloom level: Understand / Apply
• CO4: Explain the workings of laboratory, online, classroom, and field experiments and design a simple economic experiment. | Bloom level: Understand / Create
• CO5: Use oTree or z-Tree to program and implement a simple computerized experiment and organize the resulting data. | Bloom level: Apply / Create
• CO6: Critically assess experimental and behavioral economics research by comparing experimental evidence with theoretical predictions. | Bloom level: Analyse / Evaluate

• PO1: Build expertise in the theoretical and methodological foundations for data science and economics.
• PO2: Integrate new knowledge from data science and economics to advance frontiers of business, policy, and academic research.
• PO3: Understand the complementarities of economics and data science and apply interdisciplinary approaches for business and policy.
• PO4: Create new data-driven solutions using economic theory and data science that address real-world problems for social good applying principles of responsible data science, environmental, health, development and personnel economics

Required Text (scanned copy will be provided):

Holt, Charles A. Markets, games, and strategic behavior: An introduction to experimental economics. Princeton University Press, 2019.

Other textbook(s):

Friedman, Daniel, and Shyam Sunder. Experimental methods: A primer for economists. Cambridge university press, 1994.

Please note: You may purchase the textbook if you wish, however, it is NOT necessary. I will provide scanned copies of the chapters we cover in class. Alternatively, I may provide an e-book.

• Final Exam: 30%
• Class Participation: (20% participation)
• Quizzes (3-4 quizzes over the semester) will be counted in “class participation” Quizzes will be in-class – may be announced or unannounced
• Project: 25%

The project may be based on designing a simple experiment (replicating an existing one and potentially adding a new element). This will involve selecting a subject area and providing a one-page research sketch by the middle of the semester. By the end of the semester, students should be comfortable with programming a simple computerized experiment. Students are allowed to work in groups. The project may involve a few meetings with me during the course of the semester to discuss the development of the design. An alternative idea is for me to think of more creative project(s) where you all assist me in my ongoing research. I am not very firm on this idea so we can have a discussion in the third week or so about what seems to be a good choice.

• Assignments: 25%
• There will be 4 problem sets. Due dates of problem sets will be between one to two weeks after distribution. Problem sets will always be due in the last class of the week (unless otherwise specified). The lowest scoring problem set will be dropped.
• You are encouraged to discuss problem sets with me as well as your classmates. However, others should play only an “advisory” role, i.e., submitted work in this course needs to be written by you and largely be the result of your hard work. Acts of suspected plagiarism will be investigated. I strive to provide detailed solutions to problem sets within a few days of the due date. Assignments will always be due in the last class of the week (unless otherwise specified). As such I do not accept late assignments.
• Exams: There will be only one exam and it will be cumulative. Make-up exams are entirely at my discretion and are generally available only for students with direct “plausible” exam conflicts or written medical excuses. To the extent possible you must make arrangements with me in advance of the scheduled exam or will receive a score of zero.

The course grade will be based on in-class participation (20%), problem sets (25%), a project (25%) and a final exam (30%).

Grades are based on positive contributions to class discussion. For example, student opportunities to contribute to this portion of the grade will come from answering questions in class, contributing to discussions on economic conditions or macro policy, attendance, and input into group activities. Though it should go without saying, negative contributions (disruptions, distracting students around you, etc.) will have a negative effect on this portion of your course grade. Please make sure to maintain proper etiquette while attending the class so it leads to no wastage of your time as well as others’.

Students are expected to show up to class prepared and comfortable in contributing to class discussions in a positive manner. Longer discussions may be well suited for before or after class time or perhaps during office hours to ensure productive use of allotted class time. That being said, feel free to participate and ask questions during class. Students are expected to cover any missed material. Your attentiveness and respectfulness affect not only your own learning, but those around you and my ability to teach effectively. Therefore, while I don’t ban the use of electronics and laptops, I encourage you to think of whether your use of these devices enhances your learning. While some activities in class will require the use of cell phones or computers, I reserve the right to ask you to put away your electronic device at any time.

As an instructor, I share the responsibility of your education. Students can expect me to be prepared and organized, and to be available to assist in your learning in as many ways as I can. I commit to supporting my students during the course, throughout their academic careers at the university, and beyond. I am more than willing to speak with you after class, either during office hours or a scheduled meeting. Additionally, feel free to email me with any questions or concerns. I will strive to help and guide you all through this journey to the best of my ability.

Lastly, I expect the classroom learning environment to be engaging and active. I will allow you the chance to speak, and the opportunity to learn from your peers. To do this effectively you must be willing to readily share your opinions with me and each other. This will allow us to learn together and will hopefully make the process more enjoyable and fruitful for everyone involved.