Behavioral And Experimental Economics - EN38 - 202101

Abstract

This course introduces you to key issues and ideas in behavioral and experimental economics. Some of the topics we will cover in this class include: (1)Experimental methods: Experiments are increasingly used in economics. Why? What is the value of laboratory experiments in economics? How are these experiments designed and what distinguishes experimental economics from other neighboring disciplines such as experimental psychology? (2)Descriptive decision theory: Traditional theories of rationality often fail to accurately predict behavior. As a result, economists have developed alternative theories of decision that better capture human behavior. We explore one of the most famous in this class: Daniel Kahneman and Amos Tversky¿s prospect theory. (3)Probability judgments: We must often judge whether an outcome or event is probable. What rules govern these ¿probability judgments¿? How should we rationally respond to new evidence? We explore these questions and consider a variety of biases that prevent individuals from forming accurate beliefs. (4)Social norms and emotions: Game theory is the study of strategic scenarios. Many predictions of the theory are not borne out in the laboratory. We consider several experiments that highlight the importance of emotions and social norms in strategic settings such as the prisoner¿s dilemma and the ultimatum game. (5)Public policy and behavioral economics: Some economists contend that we can use insights from behavioral economics to ¿nudge¿ people into making better choices. Is nudging effective? Is it ethical? We consider arguments for and against the use of nudging