Introduction to Experimental Methods in Economics
- Credits: 6
- Ending: Examination
- Range: 2P + 2C
- Semester: summer
- Year: 3
- Faculty of Economics and Finance
Teachers
Included in study programs
Teaching results
Understanding
Distinguishing between causality and correlation
Competence
Critical thinking, identification of alternative explanations of a particular economic phenomenon, ability to ask a research question
Skills
Designing an experiment to answer a research question
Indicative content
COURSE OUTLINE
The course provides an introduction to behavioral and experimental economics, focusing on key concepts, methods, and applications in various areas of economics. Students will learn about decision-making theories, psychological biases, strategic interactions, and applications of behavioral economics in finance, labor markets, and public policy.
1. Introduction to Behavioral and Experimental Economics (Cartwright, 2018)
Definition and historical development of behavioral and experimental economics
Departure from neoclassical assumptions of rational agents
Key methods in behavioral economics: laboratory and field experiments
Landmark experimental studies and their contributions to economic knowledge
Differences between behavioral and experimental economics
2. Judgments and Heuristics (Kahneman, 2011)
Heuristics: definition and function in decision-making
Examples of heuristics: availability heuristic, anchoring, representativeness
Systematic errors in judgment and decision-making
Experiments demonstrating the impact of heuristics
Implications for economics and public policy
3. Decision-Making and Preferences (Cartwright, 2018)
Rational and irrational decision-making
Prospect Theory (Kahneman & Tversky, 1979)
Losses versus gains: effect of asymmetric evaluation
Intertemporal decision-making and time inconsistency (hyperbolic discounting)
Experimental testing of decision-making theories
4. Biases in Decision-Making (Kahneman, 2011)
Cognitive biases and their classification
Biases: confirmation bias, hindsight bias, status quo bias
Experimental evidence of biases in economic decision-making
Implications of biases for markets and economic policies
5. Noise and Uncertainty in Decision-Making (Kahneman, 2021)
Difference between noise and bias
Variability in judgments and its economic consequences
How noise affects decision-making in business and public policy
Methods for reducing noise in decision-making processes
6. Strategic Interactions (Camerer, 2011)
Introduction to game theory: basic concepts
Nash equilibrium and its applications in economics
Coordination games and dilemmas (Prisoner’s Dilemma, public goods)
Experimental testing of strategic games
Behavioral aspects of strategic interaction
7. Analytical Game Theory (Camerer, 2011)
Rationality and equilibrium strategies
Dynamic games and games with incomplete information
Principles of solving games in economics and business
Experimental verification of assumptions in analytical game theory
8. Behavioral Game Theory (Camerer, 2011)
Differences between standard and behavioral game theory
Bounded rationality and social preferences (altruism, reciprocity)
Experiments on trust, fairness, and cooperation
Use of behavioral game theory in market and policy design
9. Behavioral Labor Economics (Charness & Kuhn, 2011)
Support literature
Primary sources
• Cartwright, E. (2018). Behavioral economics. Routledge.
• Camerer, C. F. (2011). Behavioral game theory: Experiments in strategic interaction. Princeton University Press.
• Charness, G., & Kuhn, P. (2011). Lab labor: What can labor economists learn from the lab?. In Handbook of labor economics (Vol. 4, pp. 229-330). Elsevier.
• Kahneman, D. (2011). Thinking, fast and slow. Macmillan.
• Kahneman, D., Sibony, O., & Sunstein, C. R. (2021). Noise: a flaw in human judgment. Hachette UK.
• Sunstein, C. R. (2020). Behavioral science and public policy. Cambridge University Press.
• Earl, P. E. (2022). Principles of behavioral economics: Bringing together old, new and evolutionary approaches. Cambridge University Press.
Suplementary
• Angner, E. (2012). A course in behavioral economics. Macmillan International Higher Education.
• Altman, M. (2015). Handbook of contemporary behavioral economics: foundations
• and developments. Routledge.
• Altman, M. (Ed.). (2015). Real-World Decision Making: An Encyclopedia of Behavioral Economics: An Encyclopedia of Behavioral Economics. ABC-CLIO.
• Jacquemet, N., & l'Haridon, O. (2018). Experimental Economics. Cambridge
• University Press.
• Smith, V. L. (2007). Rationality in economics: Constructivist and ecological forms Cambridge University Press.
• Thaler, R. H., & Sunstein, C. R. (2009). Nudge: Improving decisions about health, wealth, and happiness. Penguin.
Requirements to complete the course
25% - Active participation assessment: Interim written assignment – Research question specification
75% - Final Exam:
25% - Semester project – The primary objective of the course is the application of experimental methods, which can only be conducted through a project
50% - Written exam
Student workload
Lectures 26 h,
Seminars 26 h,
Preparation for seminars 13 h,
Preparation of assignments 26 h,
Preparation for midterm test 13 h,
Preparation for final exam 52 h
Language whose command is required to complete the course
english
Date of approval: 28.01.2022
Date of the latest change: 27.01.2022