Experimental Economics — ECO6900 Introduction University of Ottawa Agenda ▶ Syllabus ▶ What is experimental economics about? 2/14 Course Description ▶ This course provides an introduction to behavioral economics and experimental methods in economics. 3/14 Course Description ▶ This course provides an introduction to behavioral economics and experimental methods in economics. ▶ In other economics courses, you have studied theoretical models in which most of the time agents are assumed to behave rationally. 3/14 Course Description In this course: 4/14 Course Description In this course: ▶ We will introduce models in which agents’ behavior may deviate from rationality. 4/14 Course Description In this course: ▶ We will introduce models in which agents’ behavior may deviate from rationality. ▶ We will learn the methodology for testing the assumptions and predictions of behavioral economic models. 4/14 Course Description In this course: ▶ We will introduce models in which agents’ behavior may deviate from rationality. ▶ We will learn the methodology for testing the assumptions and predictions of behavioral economic models. ▶ Either we will be able to confirm the predictions of the theories or we will find evidence that the theories are incorrect or incomplete Usually because they are based on questionable assumptions. 4/14 Course Description In this course: ▶ We will introduce models in which agents’ behavior may deviate from rationality. ▶ We will learn the methodology for testing the assumptions and predictions of behavioral economic models. ▶ Either we will be able to confirm the predictions of the theories or we will find evidence that the theories are incorrect or incomplete Usually because they are based on questionable assumptions. ▶ Students will also become familiar with state-of-the-art research methodology in experimental economics. 4/14 Course Objectives Upon completing this course, the student should be able to: 5/14 Course Objectives Upon completing this course, the student should be able to: 1. Learn main aspects and assumptions of behavioral models in economics. 5/14 Course Objectives Upon completing this course, the student should be able to: 1. Learn main aspects and assumptions of behavioral models in economics. 2. Identify and understand the elements of experimental design. 5/14 Course Objectives Upon completing this course, the student should be able to: 1. Learn main aspects and assumptions of behavioral models in economics. 2. Identify and understand the elements of experimental design. 3. Analyze and critique an experimental design. 5/14 Course Objectives Upon completing this course, the student should be able to: 1. Learn main aspects and assumptions of behavioral models in economics. 2. Identify and understand the elements of experimental design. 3. Analyze and critique an experimental design. 4. Analyze and present experimental data. 5/14 Textbooks and Materials ▶ Holt, Charles, “Markets, Games and Strategic Behavior, An Introduction to Experimental Economics”, Second Edition, Princeton University Press, 2019. ▶ Angner, Erik, “A Course in Behavioral Economics” Macmillan Education Palgrave, Second Edition, 2016. ▶ Carpenter and Robbett, “Game Theory and Behevior, MIT, 2022 6/14 Course Evaluation ▶ In-Class Experiments: 10% ▶ Assignments: 20% ▶ Midterm: 20% ▶ Referee Report and Presentation: 20% ▶ Final Exam: 30% 7/14 Referee Report This is an individual task 1. I will upload a list of papers from job market candidates. 2. Each student will select one paper (first come, first served) 3. You will have to write a referee report (3-4 pages) 4. You will have to prepare a 10 min presentation in which you summarize the main findings of the paper. 8/14 Problem Sets You will have to solve 2 problem sets through the course. These will be submitted via Crowdmark. ▶ The solution to each question must be scanned and uploaded to the appropriate question. In order to receive a graded, submissions must be uploaded to the correct questions in the proper orientation. Submissions must be double checked on a computer to ensure orientation is valid and is legible. All assignments are due at 23:59 on their respective due dates. No late problem sets will be accepted. ▶ Before submitting your assignment, make sure the pages are in the order and rotated correctly. Otherwise the I may deduct some points. ▶ If you have technically difficulties uploading your answers, you should send the pictures with your answers to gfenig@uottawa before the deadline (23:30). Otherwise you will be given a 0. 9/14 In-Class Experiments ▶ We will conduct online experiments, which is why it is essential for you to bring your cellphone, tablet, or laptop. ▶ I will provide you with clear instructions on how to log in, which essentially involves visiting a specific URL. ▶ Maintaining an 80% participation rate in these experiments is necessary to receive full credit for your involvement. ▶ Given that students are permitted to miss up to 20% of the experiments and still be eligible for full credit, there will not be any opportunities for participation makeup. 10/14 Economics as an Experimental Science “One possible way of figuring out economic laws … is by controlled experiments …. Economists (unfortunately) … cannot perform the controlled experiments of chemists or biologists because they cannot easily control other important factors. Like astronomers or meteorologists they must be content largely to observe.” (Samuelson and Nordhaus, 1985) 11/14 Economics as an Experimental Science ▶ Currently, most economists will accept that theoretical models’ predictions that are not supported by evidence in the lab should be reconsidered. 12/14 Economics as an Experimental Science ▶ Currently, most economists will accept that theoretical models’ predictions that are not supported by evidence in the lab should be reconsidered. ▶ Consolidation of experimental economics: 12/14 Economics as an Experimental Science ▶ Currently, most economists will accept that theoretical models’ predictions that are not supported by evidence in the lab should be reconsidered. ▶ Consolidation of experimental economics: 1. Publication of experimental papers in top journals. 12/14 Economics as an Experimental Science ▶ Currently, most economists will accept that theoretical models’ predictions that are not supported by evidence in the lab should be reconsidered. ▶ Consolidation of experimental economics: 1. Publication of experimental papers in top journals. 2. Nobel Prices: Kahneman and Smith (2002), Ostrom (2009), Roth (2012), and Thaler (2017) 12/14 Number of Publications in Experimental Economics in Top 5 Journals 13/14 What is Experimental Economics? ▶ The use of treatment intervention and induced preferences with real human subjects and financial incentives to pose questions in the social sciences that are difficult to answer using theory or field data. 14/14 What is Experimental Economics? ▶ The use of treatment intervention and induced preferences with real human subjects and financial incentives to pose questions in the social sciences that are difficult to answer using theory or field data. ▶ What it isn’t: 14/14 What is Experimental Economics? ▶ The use of treatment intervention and induced preferences with real human subjects and financial incentives to pose questions in the social sciences that are difficult to answer using theory or field data. ▶ What it isn’t: Behavioral economics (though the two overlap significantly). 14/14 What is Experimental Economics? ▶ The use of treatment intervention and induced preferences with real human subjects and financial incentives to pose questions in the social sciences that are difficult to answer using theory or field data. ▶ What it isn’t: Behavioral economics (though the two overlap significantly). A complete substitute for field data (though it is often a necessary substitute). 14/14 What is Experimental Economics? ▶ The use of treatment intervention and induced preferences with real human subjects and financial incentives to pose questions in the social sciences that are difficult to answer using theory or field data. ▶ What it isn’t: Behavioral economics (though the two overlap significantly). A complete substitute for field data (though it is often a necessary substitute). A battle call against economic theory (though it has a lot to say about theory’s default assumptions). 14/14 What is Experimental Economics? ▶ The use of treatment intervention and induced preferences with real human subjects and financial incentives to pose questions in the social sciences that are difficult to answer using theory or field data. ▶ What it isn’t: Behavioral economics (though the two overlap significantly). A complete substitute for field data (though it is often a necessary substitute). A battle call against economic theory (though it has a lot to say about theory’s default assumptions). 14/14