DEPARTMENT OF ECONOMICS
Econ 143
EXPERIMENTAL ECONOMICS
Professor
James Andreoni
215 Economics Building
Office Hours: Thursdays 3-4 and by appointment
Course Description: This course will be a survey of some of the recent literature on Experimental Economics. This is one of the fastest growing areas of economic research. Traditionally, economic science was conducted purely by observing behavior “in the field”. For the last 30 years—and most intensively for the last 10-15 years—economists have increasingly turned to doing controlled experiments to learn about economic behavior. There have been thousands of studies. We will attempt to cover some of these, hopefully choosing topics that we all will find most relevant to our own economic interactions.
Text: There is no text for the course—no texts actually exist for this topic, since it is changing so fast. There will be readings for every lecture, however. These will be drawn from academic journals and recently completed but as yet unpublished research papers. I will make every attempt to have these posted for you on the course website well before each lecture. You will be reading a lot of papers that are pretty advanced. Fortunately, the experiments are (by design) usually very easy to understand, although some of the economic theory and econometric analysis may be fairly advanced. In such cases I will try to give you a “reader’s guide” to each paper.
Format: Despite the large numbers in the class, we will attempt to teach this in a seminar format, with plenty of interaction and discussion among the students. We will often do classroom demonstrations of the experiments we are studying. I invite students to ask a lot of questions, challenge the economic models and predictions, and perhaps we will even be motivated to dream up new economic theories and experimental tests!
Lab Fee: There will be a $20 lab fee for this course that we will use to add incentives to our classroom experiments. The total lab fees will be refunded to the class at the end of the term as a function of how many points people earn in the demonstrations. In addition to what we collect from you, Professor Andreoni will also chip in $200 to the pot. So, in principle, everyone can make money.
Exams and Grades: The course will have two exams, one at midterm and one during finals week, and two short papers. Exams will each be worth 40%. Each paper is worth 10%. The midterm exam will be Tuesday, February 12, in class.
Short papers: You will also be graded on two short papers. Each short paper should be about 3 pages. It should summarize the hypothesis, experimental design, and empirical finding of one experimental paper published in a leading economics journal, but not discussed in detail in class. You can search for a topic in the references of one of the papers we read, or by using the Web of Science (http://portal.isiknowledge.com/portal.cgi? ) to look up other papers that may have cited paper we have read. Your first paper can be completed a week before the first midterm, and the second a week before the last class.
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Econ 143 – Experimental Economics SCHEDULE OF LECTURES |
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Dates |
Topic |
Reading |
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Jan 8 |
Welcome |
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Jan 10 |
Introduction |
Class notes only |
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Part 1: Individual Decisions |
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Jan 15 |
The Endowment Effect |
Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler “Experimental Tests of the Endowment Effect and the Coase Theorem” The Journal of Political Economy Vol. 98, No. 6 (Dec., 1990), pp. 1325-1348. [link]
Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler “Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias” The Journal of Economic Perspectives Vol. 5, No. 1 (Winter, 1991), pp. 193-206 [link]
John A. List “Does Market Experience Eliminate Market Anomalies?” The Quarterly Journal of Economics Vol. 118, No. 1 (Feb., 2003), pp. 41-71 [link] William T. Harbaugh, Kate Krause, Lise Vesterlund, Are adults better behaved than children? Age, experience, and the endowment effect, Economics Letters (70)2 (2001) pp. 175-181. [link] Charles R. Plott and Kathryn Zeiler ‘The Willingness to Pay-Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations’, The American Economic Review Vol. 95, No. 3 (Jun., 2005), pp. 530-545 [link]
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Jan 17 |
Risk: Expected Utility |
Charles A. Holt; Susan K. Laury “Risk Aversion and Incentive Effects” (in Shorter Papers) The American Economic Review, Vol. 92, No. 5. (Dec., 2002) [link]
Rabin, Matthew, “Risk aversion and expected utility theory: A calibration theorem," Econometrica, 2000a, 68 (5), 1281-1292. [link]
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Jan 22 |
Risk: Prospect Theory |
Kahneman, Daniel and Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk,” Econometrica, 1979, 47 (2), 263–291. [link]
Harbaugh, William T., Kate Krause, and Lise Vesterlund, “The Fourfold Pattern of Risk Attitudes in Choice and Pricing Tasks,” The Economic Journal, 2010, 120, 595–611 [link]
James Andreoni and William T. Harbaugh "Unexpected Utility: Experimental Tests of Five Key Questions about Preferences over Risk." , December 2009.
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Jan 24 |
Risk: Certainty Effect |
Gneezy, Uri, John A. List, and George Wu, “The Uncertainty Effect: When a Risky Prospect Is Valued Less Than Its Worst Possible Outcome,” The Quarterly Journal of Economics, 2006, 121 (4), 1283–1309. [link]
James Andreoni and Charles Sprenger, "Uncertainty Equivalents: Linear Tests of the Independence Axiom." , May 2010 [link]
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Jan 29 |
Time: Theory |
Laibson, David, “Golden Eggs and Hyperbolic Discounting," Quarterly Journal of Economics, 1997, 112 (2), 443-477. [link]
Ted O.Donaghue and Matthew Rabin (1999), “Doing It Now or Later.” American Economic Review, 89, 103-124 [link] |
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Jan 31 |
Time: Tests |
James Andreoni and Charles Sprenger, “Measuring Time Preferences with Convex Budgets.” American Economic Review, December 2012a
James Andreoni and Charles Sprenger, “Risk Preferences are not Time Preferences,” American Economic Review, December 2012b |
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Feb 5 |
Updating Beliefs |
Gary Charness and Dan Levin, "When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect" American Economic Review, September 2005. [link]
Matthew Rabin and Joel L. Schrag, First impressions matter: A model of
confi
James Andreoni and Tymofiy Mylovanov, “Diverging Opinions.” [link] American Economic Journal, Microeconomics, 2012
David Eil and Justin Rao, “The Good News-Bad News Effect: Asymmetric Processing of Objective Information about Yourself “ Forthcoming AEJ Micro. [link] |
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Feb 7 |
Discrimination |
Holt, Charlie and Lisa Anderson, “Information Cascades in the Laboratory," American Economic Review, December 1997, 847-862 [link]
Marianne Bertrand and Sendhil Mullainathan, “Are Emily and Greg More
Employable than Lakisha and Jamal? A Field Experiment on Labor Market
Discrimination” The American
Economic Review
Catherine Eckel and Ragan Petrie "Face Value," American Economic Review, forthcoming, 2010. [link] |
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Feb 12 |
Exam 1 |
Exam 1: Required Readings for 1st exam |
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Part 2: Strategic Choice |
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Feb 14 |
Multiple Equilibria: Coordination |
Van Huyck, John B., Raymond C. Battalio, and Richard O. Biel, “Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure.” American Economic Review, 1990, 80(1), pp. 234-48. [link]Roberto Weber, “Managing Growth to Achieve Efficient Coordination in Large Groups” American Economic Review 96(1) (March 2006). 114-126. [link]
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Feb 19 |
Dominant Strategy Equilibria & Backward Induction: Prisoner’s Dilemma and Public Goods |
Andreoni, James and J.H.Miller. "Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence.'' Economic Journal, v.103, May 1993, 570-585. [link]
Isaac, R. Mark and James Walker, "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism.'' Quarterly Journal of Economics, 1988, 179-99. [link]
Andreoni, James, “Cooperation in Public Goods Experiments: Kindness or Confusion?”' American Economic Review, 1995. [link]
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Feb 12 |
Subgame Perfect Equilibria: Ultimatum Bargaining. |
Forsythe, Robert, Joel Horowitz, N.S. Savin and Martin Sefton. “Fairness in Simple Bargaining Games.” Games and Economic Behavior, May 1994, 6(3), pp. 347—69. [link]
Slonim, Robert and Alvin E. Roth, “Learning in High Stakes Ultimatum Games: An Experiment in the Slovac Republic.” Econometrica, 66, 3, May 1988, 569-96. [link]
Andreoni, James; Marco Castillo; and Ragan Petrie. “What Do Bargainers’ Preferences Look Like? Experiments with a Convex Ultimatum Game.” The American Economic Review, Vol. 93, No. 3. (Jun., 2003), pp. 672-685. [link]
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Feb 26 |
Subgame Perfect Equilibria: Trust |
Berg,
Joyce, John Dickhaut, and Kevin McCabe. “Trust, Reciprocity, and Social
History,” Games and
Economic Behavior, 1995, 10, 122-142. [link] Cox, James C. “How to Identify Trust and Reciprocity.” Games and Economic Behavior, 2004, 46, 260–281. [link]
Ferh, Ernst, et al., ''Does Fairness Prevent Market Clearing? An Experimental Investigation.'' QJE, May 1993,437-59. [link]
Gneezy, Uri and John List, "Putting Behavioral Economics To Work: Testing for Gift Exchange in Labor Markets Using Field Experiments." Econometrica, September 2006, V 74, 1365-1384. [link]
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Part 3: Sociality and Economic Decisions |
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Feb 28 |
Preferences for Altruism |
Andreoni, James, and J.H. Miller,"Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism.'' Econometrica, v. 70, no.2, March 2002, 737-753. [link]
Andreoni, J., Vesterlund, L., 2001. Which is the fair sex? Gender differences in altruism. Quarterly Journal of Economics, 116 (1), 293–312. [link]
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Mar 5 |
Moral Choices: Recognition and Requests |
Andreoni, J., and R. Petrie (2004): “Public Goods Experiments Without Confidentiality: A Glimpse Into Fund-Raising,” Journal of Public Economics, 88, 1605–1623 [link]
James Andreoni and Justin Rao,"The Power of Asking: How Communication Affects Selfishness, Empathy, and Altruism." April 2010. Forthcoming in Journal of Public Economics. [link]
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Mar 7 |
Moral Choices: Excuses, Avoidance, and Audience Effects |
DANA, J., D.M. CAIN, AND R.M. DAWES (2006): “What You Don’t Know Won’t Hurt Me: Costly (But Quiet) Exit in Dictator Games,” Organizational Behavior and Human Decision Processes, 100, 193–201. 1608-1619 [link]
DANA, J., R. A. WEBER, AND X. KUANG (2007): “Exploiting Moral Wiggle Room: Experiments Demonstrating an Illusory Preference for Fairness,” Economic Theory, 33, 67–80. 1608-1621 [link]
James Andreoni and B. Douglas Bernheim "Social Image and the 50-50 Norm: A Theoretical and Experimental Analysis of Audience Effects." Econometrica, 77, no. 5, September 2009, 1607-1636. [link]
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Mar 12 |
Preferences for Competition and the Wage Gap |
Muriel Niederle and Lise Vesterlund, “Do Women Shy Away from Competition? Do Men Compete Too Much” . Quarterly Journal of Economics, August 2007, Vol. 122, No. 3: 1067-1101. [link]
Muriel Niederle and
Lise Vesterlund,“Explaining
the Gender Gap in Math Test Scores: The Role of Competition,”
Forthcoming Journal of Economic Perspectives [link] Gneezy, Uri, and Aldo Rustichini, “Gender and Competition at a Young Age,” American Economic Review Papers and Proceedings, XCIV (2004), 377–381. [link] |
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Mar 14 |
Beauty, Sex, Money, and Dating |
James Andreoni and Ragan Petrie "Beauty, Gender and Stereotypes: Evidence From Laboratory Experiments." Journal of Economic Psychology, v. 29, 2008, 73-93. [link]
Markus Mobius and Tanya Rosenblat, “Why Beauty Matters in the Labor Market,” AER, v 96 n. 1, March, 2006, p. 222-235 [link]
Raymond Fisman, Sheena S. Iyengar, Emir Kamenica, Itamar Simonson “Gender Differences in Mate Selection: Evidence from a Speed Dating Experiment.” Quarterly Journal of Economics May 2006, Vol. 121, No. 2: 673-697. [link]
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Final Exam |
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Time, Place TBA |