Experimental Economics

Module description

Experiments in economics have generated new insights into how people behave. Together with earlier psychological work, they have spawned a new field in economics called Behavioural or Experimental economics. This module is concerned with how these insights regarding individual behaviour are transforming positive and normative economics. For example, we will be concerned with the following questions.

• In what ways do people behave differently to the predictions of rational choice theory (i.e. the expected utility maximisation model)?

• What is loss aversion and reference dependence?

• What is the best model of social preferences?

• Does inequality harm cooperation and trust?

• Do people value procedures as well as outcomes?

• Should governments engage in ‘nudging’?

• How do social preferences affect the analysis of market failure?

• Is welfare economics possible if people do not have well behaved preferences?

 

The module will appeal to students who are interested in how people actually behave and, in particular, in how economics and policy making are being transformed by these new insights into how people behave.

Assessment details

2-hour online exam (65%), 1,000-word essay (25%) and seminar presentation (10%)

Educational aims & objectives

The module is designed to develop:

• General critical and analytical skills
• Specific knowledge of the experimental method
• Specific knowledge of key behavioural insights from experiments in economics
• Presentational skills

Learning outcomes

• Understanding of the experimental method and the design of experiments
• Knowledge of key behaviours revealed in experiments
• Understanding of how behavioural insights affect debates in positive and normative economic
• Analytical skill
• Critical skills
• Presentational skill
• Understanding of human behaviour, particularly in groups

Teaching pattern

The module will cover the following topics (provisional):

1) The Experimental method

2) Public goods games and cooperation

3) Ultimatum, Dictator and Contest games and social preferences for equity and efficiency

4) Prospect Theory, loss aversion, reference dependence and nudging

5) Decision by sampling and level-k theory as models of bounded rationality

6) Crowding in /out of social preferences

7) Competition and bargaining

8) Behavioural time discounting

Suggested reading list

Preparatory reading (if you have not read it already):

Kahneman, D. Thinking Fast and Slow

Ariely, D. Predictably Irrational

Sunstein, C. and Thaler, R. Nudge: Improving Decisions about Health, Wealth and Happiness

Module description disclaimer

King’s College London reviews the modules offered on a regular basis to provide up-to-date, innovative and relevant programmes of study. Therefore, modules offered may change. We suggest you keep an eye on the course finder on our website for updates.

Please note that modules with a practical component will be capped due to educational requirements, which may mean that we cannot guarantee a place to all students who elect to study this module.

Please note that the module descriptions above are related to the current academic year and are subject to change.