040832 UK Behavioral and Experimental Economics (MA) (2015W)

Behavioral economics attempts to make economics a more relevant and powerful science of human behavior by integrating insights from psychology and the social sciences into economics. Experimental economics adapts methods developed in the natural sciences to study economic behavior. Experiments are valuable in testing to what extent the integration of insights from other disciplines into economics is necessary and fruitful.

Behavioral and Experimental Economics is a vibrant field of research in economics and sheds new light on many old and important issues in economics. While still young, the field has received wide recognition in recent years, for example by the award of the Nobel Prize in Economics 2002 to Daniel Kahneman and Vernon Smith (the Nobel Prize winners Reinhard Selten 1994, Elinor Ostrom in 2009, and Alvin Roth 2012 have also importantly contributed to experimental economics). The field is rapidly growing. This course can therefore not provide a comprehensive overview but concentrates on selected topics instead.

The course addresses the following questions:
- What are the advantages and limitations of experimental economics?
- How important are deviations from the assumptions of full rationality and strict self-interest in determining outcomes of economic interaction? It is argued that identifying individual-level “anomalies” is not sufficient to demonstrate their economic and social importance. Instead, it must be analyzed how institutions mitigate and multiply these anomalies. A broad range of institutions, including markets, bargaining and voting is discussed.