| | AREC 815: Experimental and Behavioral Economics
Spring 2007
Course Description This course will provide the student with the necessary tools to be an avid consumer of the experimental and behavioral literature and eventually a producer of the literature. It will provide a summary of recent experimental findings and details how to gather and analyze data using experimental methods. In the field of behavioral economics, the class will discuss new developments in economic theory which has attempted to adjust standard neoclassical models in order to explain such observed experimental findings and behavioral patterns which commonly occur but are “paradoxical” for traditional models. Class times: Topics I. Introduction to experimental and behavioral economics II. Experimental Methods and Topics - Experimental terminology, some common statistical methods, etc.
Controlling preferences with money; controlling risk posture - Experimenter effects; sample selection in the lab
Choice of experimental design - Markets (one-sided, two-sided auctions, collusion)
Public economics (linear games, charitable, wta/wtp/endowment effect, hypothetical bias) and simple public goods experiment - Social preferences (gift exchange, dictator, ultimatum) and simple gift exchange experiment
- Field Experiments
III. Behavioral Economics (Schedule see below) A. Other regarding preferences
Tuesday April 3rd - April 10th A. Other regarding preferences, social preferences Thaler, Richard (1989) “Anomalies: The Ultimatum Game,” Journal of Economic Perspectives, 2, 195-206. LINK Camerer, Colin and Richard Thaler, "Anomalies: Ultimatums, Dictators and Manners." Journal of Economic Perspectives, 9, 1995, 209-219. LINK
Inequity-Aversion Fehr, E. and K. Schmidt (1999), “A Theory of Fairness, Competition, and Cooperation,” Quarterly Journal of Economics 114, 817-868. LINK Bolton, G. and A. Ockenfels (2000), “ERC: A Theory of Equity, Reciprocity, and Competition,” American Economic Review 90, 166-193. LINK Engelmann, Strobel, “Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments”, American Economic Review LINK Fehr, E. and K. Schmidt, The role of Equality, Efficiency, and Rawlsian Motives in Social Preferences: A Reply to Engelmann and Strobel LINK
Reciprocity, intentions
Rabin, M. (1993), “Incorporating Fairness into Game Theory and Economics,” American Economic Review 83, 1281-1302. In CLR. LINK Dufwenberg, M. and G. Kirchsteiger (2004), “A Theory of Sequential Reciprocity,” Games and Economic Behavior 47, 268-298. LINK Falk, A. and U. Fischbacher, “A theory of reciprocity” LINK
Altruism and warm glow
Andreoni and Miller (2002), “Giving according to GARP”: An experimental test the consistency of preferences for altruism, Econometrica, 737-753. LINK Andreoni, James, "Toward and Theory of Charitable Fundraising," Journal of Political Economy, vol. 106 (1998), pp. 1186-1213. LINK Harbough, W. ,1998, What do Donations buy? A model of philantropy based on prestige and warm-glow, JPubE, 269-284. LINK Andreoni, James, "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy 97 (1989), 1147-1458. LINK Andreoni, James, "Impure Altruism, and Donations to Public Goods: A Theory of Warm-Glow Giving," The Economic Journal 100 (1990), 464-477. LINK Bénabou/Tirole, 2006, Incentives and Prosocial Behavior, American Economic Review 96(5), 1652-1678.
Applications and Tests
Charness, G. and M. Rabin (2002), “Understanding Social Preferences with Simple Tests,” Quarterly Journal of Economics 117, 817-869. LINK Morgan, J., K. Steiglitz, and G. Reis (2003), “The spite motive and equilibrium behaviour in auctions”, Contributions to Economic Analysis& Policy, 2(1), Art. 5. LINK Benjamin, Daniel, “A Theory of Fairness in Labor Markets” LINK
Thursday April 12th - April 19th Preferences over Goods & Gambles Knetsch, Jack L., Richard H. Thaler, Daniel Kahneman, "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias." Journal of Economic Perspectives, Vol. 5, No. 1. (Winter, 1991), 193-206. LINK Machina, Mark. “Choice under uncertainty: problems solved and unsolved.” JEP Summer 1987. LINK Ellsberg, D. (1961), “Risk, Ambiguity and the Savage Axioms,” Quarterly Journal of Economics 75, 643-669. LINK Tversky, A, and D. Kahneman (1991), “Loss aversion in riskless choice: A reference dependent model”, QJE 106(4), 1039-1061. LINK Kahneman, D. and A. Tversky (1979), “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47, 263-291. LINK Tversky, A. and D. Kahneman (1992), “Advances in Prospect Theory: Cumulative Representation of Uncertainty,” Journal of Risk and Uncertainty 5, 297-324.
Prelec, Drazen, 1998, “The Probability Weighting function.” Econometrica, 66, 497 – 527. Gonzales, R. and G. Wu (1999); “On the Shape of the Probability Weighting Function”, Cognitive Psychology 38, 129-166. LINK Wu, G. and R. Gonzales (1999), “Nonlinear Decision Weights in Choice under Uncertainty”, Management Science 45, 74-85. LINK Wu, G. and M. Abdellaoui (2005), „Testing Prospect Theories Using Probability Tradeoff Consistency”, JRU 30(2), 107-131. LINK
April 24th - April 26th Preferences over time – discounting Frederick, S., G. Loewenstein, and T. O’Donoghue (2002), “Time Discounting and Time Preference: A Critical Review,” Journal of Economic Literature 40, 351-401. LINK Loewenstein, G. and D. Prelec (1992): “Anomalies in Intertemporal Choice: Evidence and an Interpretation,” Quarterly Journal of Economics, 107, 2, 573-597. LINK
Laibson, D. “Golden eggs and hyperbolic discounting”, QJE, v112 n2, May 1997, p.443-77. LINK Laibson, D., Repetto, A., and Tobacman, J., “Self-control and saving for retirement”, BPEA, 1998 (1), p.91-196. LINK Gul and Pesendorfer, “Self Control, Revealed Preference and Consumption Choice” LINK
O’Donoghue and Rabin (1999), “Doing It Now or Later,” American Economic Review 89, 103-124. In CLR. LINK O’Donoghue, T. and M. Rabin (2000): “The Economics of Immediate Gratification,” Journal of Behavioral Decision Making, 13, 233-250. LINK O’Donoghue, T. and M. Rabin (2001), “Choice and Procrastination,” Quarterly Journal of Economics 116, 121-160. LINK
Fischer, Carolyn. “Read This Paper Later: Procrastination with Time-Consistent Preferences,” Journal of Economic Behavior and Organization v46, n3 (November 2001): 249-69 LINK
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