Economics serving society

Program Content

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Main lecture : Experimental methodology : objectives, methods and uses of experiments in economics, by Nicolas Jacquemet

The course provides an overview of the use of controlled experiments to investigate research questions in economics and social sciences. The focus is methodological, and illustrated by examples and applications taken from the literature. The course goes through the main methodological questions related to the use of controlled experiments to produce empirical knowledge: why are controlled experiments needed (i.e., what kind of question ios best answered thans to controlled experiments)? How to design a controlled experiment (i.e., internal validity issues)? And what are experimental results useful for (i.e., external validity)?

Selected key references
- Jacquemet N., L’Haridon O, (2018), “Experimental Economics: Method and Applications”. Cambridge University Press.

This course takes place every day

Structure

  • Why? The need for experimental methods in economics
  • How? Laboratory experiments in practice
  • What for? What laboratory experiments tell us

Workshop: present your paper
Participants will have the opportunity to submit a paper to be presented within this program. Selected papers will be presented in front of participants and faculty in slots reserved for such presentations.


TOPIC 1: Methods and tricks of the trade – Béatrice Boulu-Reshef

The first session is an “experimental lecture”, in which by putting participants in the shoe of an experimental subject aims at pointing to classical problems and solutions to the practical implementation of a lab experiment. The purpose is to show them in vivo how experimental protocols can be implemented and illustrate the relevance or shortcomings of some practices and methods. Moreover, being in the shoes of a subject in the lab makes salient what typical mistakes can be avoided when researchers design an experiment and what effects some features can have on observed behavior. Either classic studies that have set standards for the field or counter-examples to good practice will be run. The second session is dedicated to the writing of instructions, a topic often neglected although of critical importance. The goal of instructions is to make sure that the experimental subjects fully understand the rules of an experiment. If subjects do not understand the rules, control is lost, and the experiment is invalidated and unpublishable. Thus, learning how to write experimental instructions is crucial. This lecture focuses on teaching how to write experimental instructions. We explain what experimental instructions need to achieve, and hence, list the rules that are commonly used by experimental economists. We also review the features of experimental instructions that are debated in the literature. The lecture reviews typical instructions for the main types of experiments. Students will work on writing instructions and will discuss their work in class. The third session deals with how to extend lab experiment to the field.

Selected key references
- Davis, D. and C. A. Holt, (1993), “Experimental Economics”, Princeton University Press.

- D. Friedman and S. Sunder, (1994), “Experimental Methods: A Primer for Economists”, Cambridge University Press.

- Guala F. (2005), “The Methodology of Experimental Economics”. New York: Cambridge University Press.


TOPIC 2: Preferences over time and uncertainty – Olivier L’Haridon

Preferences over time and uncertainty are critical drivers of economic behavior in many contexts. Several experimental methods have been developed to measure them. These methods serve to elicit preferences over time and uncertainty either as control variables in more general experiments, but also to test decision-theoretic models. These methods are presented in this lecture with a specific focus on their relative merits. A special emphasis will be put on robust methods to elicit cumulative prospect theory parameters for decision under risk.

Selected key references
- Abdellaoui, M. (2000). “Parameter-free elicitation of utility and probability weighting functions”. Management Science, 46(11), 1497-1512.

- Abdellaoui, M., Bleichrodt, H., l’Haridon, O., & Paraschiv, C, (2013), “Is there one unifying concept of utility? An experimental comparison of utility under risk and utility over time”. Management Science, 59(9), 2153-2169.

- Wakker, P., & Deneffe, D, (1996), “Eliciting von Neumann-Morgenstern utilities when probabilities are distorted or unknown”. Management science, 42(8), 1131-1150.

- Wakker, P. P, (2010), “Prospect theory: For risk and ambiguity”. Cambridge university press.


TOPIC 3: Psychometric methods – Fabrice Etilé

This class will introduce the main principles of psychometrics, present the technical stages of development and validation of a stage, show how psychometrics can be used in empirical economics, and finally discuss identification problems and epistemological issues. The course will be based on three sets of papers: (1) articles that develop and validate psychometric scales (with a specific focus on the BIS/BAS scale that measures dispositional sensitivity to rewards and punishments; (2) works that use psychometric scales (especially the BIS/BAS) for interpreting the individual heterogeneity of behaviours in standard experimental games: (3) studies investigating some methodological aspects and limits of psychometrics scales.

Selected key references
- Kline, P, (2014), “The new psychometrics: Science, psychology and measurement”. New York: Routledge.

- Carver, C. S., & White, T. L, (1994), “Behavioral inhibition, behavioral activation, and affective responses to impending reward and punishment: the BIS/BAS scales”. Journal of personality and social psychology, 67(2), 319.

- Skatova, A., & Ferguson, E, (2011), “What makes people cooperate? Individual differences in BAS/BIS predict strategic reciprocation in a public goods game”. Personality and Individual Differences, 51(3), 237-241.

- Borghans, L., Golsteyn, B. H., Heckman, J., & Humphries, J. E, (2011), “Identification problems in personality psychology.”, Personality and individual differences, 51(3), 315-320.


TOPIC 4: Econometrics for experimental data – Angelo Secchi

This module provides an overview on econometrics for experimental data with a strong emphasis on non-parametric techniques. Estimating probability densities, distribution free tests et nonparametric regressions will be discussed together with examples and practical suggestions on how to implement them.

Selected key references
- Silverman, B.W, (1986), “Density Estimation for Statistics and Data Analysis”, Chapman & Hall.

- Racine, J.S, (2008), “Nonparametric Econometrics: A Primer, Foundations and Trends” in Econometrics: Vol. 3: No 1, pp 1-88.

- Hollander, M., Dougla A. Wolfe and E. Chicken, (2014), “Nonparametric Statistical Methods”, third edition, Wiley.

TOPIC 5: Introduction to Neuroeconomics – Mael Lebreton

Neo-classical approaches to individual decision-making historically put a strong emphasis on choices, through revealed preference approaches, and have remained oblivious about the actual cognitive processes and mechanisms underlying decision (Gul & Pesendorfer, 2008). This class will first discuss the history, goals and methods of the neuroeconomics research agenda, which explicitly aimed at filling this gap, by investigating the neural and cognitive bases of human choices (Camerer et al., 2004; Glimcher & Fehr, 2014). It will then illustrate how important concepts and methods from cognitive neuroscience such as evidence accumulation and attention, neural range adaptation and cognitive noise can contribute to inform theories of human economic decision making.

Selected key references
- Camerer, C. F., Loewenstein, G., & Prelec, D, (2004), “Neuroeconomics: Why economics needs brains”. The Scandinavian Journal of Economics, 106(3), 555–579.

- Glimcher, P. W., & Fehr, E, (2014), “Neuroeconomics: Decision Making and the Brain”. Academic Press. New York.

- Gul, F., & Pesendorfer, W, (2008), “The Case for Mindless Economics. In A. Caplin & A. Schotter, The Foundations of Positive and Normative Economics”. Oxford University Press.


Contents - Experimental Economics