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

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.

Note: Students may purchase the textbook if they want, it is NOT necessary. The faculty will provide scanned copies of the chapters which will be covered in the class.

Research papers and book chapters are assigned throughout the semester, including readings by Rachel Croson and Simon Gächter, Sendhil Mullainathan and Richard H. Thaler, Guillaume R. Fréchette, and Utteeyo Dasgupta, Lata Gangadharan, and Andrew Souther, along with selected textbook chapters and lecture slides.