30261  EXPERIMENTAL ECONOMICS AND PSYCHOLOGY
Department of Decision Sciences
PIERPAOLO BATTIGALLI
Suggested background knowledge
Mission & Content Summary
MISSION
CONTENT SUMMARY
1. Introduction: correlation is not causation; experiments in social sciences; why we need models.
2. Classic axiomatic approach to choices: everything breaks down if you change your mind.
3. Axiomatic approach to uncertainty: Bayes rule.
4. Von NeumannMorgenstern expected utility. Subjective expected utility.
5. Probabilistic biases and prospect theory.
6. Intertemporal choice. Rational planning.
7. Analysis of experimental data, I.
8. Analysis of experimental data, II.
9. Introduction to game theory: simultaneous moves.
10. Introduction to game theory: sequential moves.
11. Introduction to game theory: incomplete information.
12. Introduction to psychological game theory.
13. Trust and guilt aversion: theory.
14. Trust and guilt aversion: experiments.
15. Threats and anger: theory.
16. Threats and anger: experiments.
17. Reciprocity: theory.
18. Reciprocity: experiments.
19. Deception: theory.
20. Deception: experiments.
21. Setup of a lab experiment. Ethics.
22. Dual theory.
23. Covid19: (i) a perfect natural experiment? (ii) behavioral biases in the reaction of politicians and people.
24. Sum up lecture.
Intended Learning Outcomes (ILO)
KNOWLEDGE AND UNDERSTANDING
 describe (i) the classical models of choice in singleperson and interactive decision problems and (ii) the rudiments of the psychological theory of decisions and games;
 identify and illustrate what psychological considerations can be covered by such models, and what require different models;
 distinguish between observational and experimental data;
 explain the rudiments of experimental economics.
APPLYING KNOWLEDGE AND UNDERSTANDING
 Represent a concrete singleperson or multiperson decision problem as a game
 Implement such games in the lab, setting up an experiment
 Express experimental hypotheses, possibly deriving them from models and auxiliary assumptions
 Analyze experimental data, comparing them with theoretical predictions, devise possible reasons for the rejection of such predictions
Teaching methods
 Facetoface lectures
 Online lectures
 Individual assignments
 Group assignments
DETAILS
Online lectures will consists of the recording and, possibly, the synchronous streaming of facetoface lectures, or alternative methods, such as recorded presentations of slides, should facetolectures become unfeasible.
Individual assignements: solution of problem sets.
Group assignments: experimental project, from the theoretical motivation to the design, andif possiblethe implementation and analysis of the experiment.
Assessment methods
Continuous assessment  Partial exams  General exam  


x  

x  

x 
ATTENDING AND NOT ATTENDING STUDENTS
The written exam will verify whether students have learned the more theoretical parts of the course and the most important experimental results.
Individual assignements will allow students to selfassess their understanding of the more theoretical parts of the course, and the teacher to verify such understanding while the course is being taught.
Group assignements will allow students to practice with experimental methods.
The written exam is worth at most 19 points.
Assignements are worth a total of at most 12 points.
Teaching materials
ATTENDING AND NOT ATTENDING STUDENTS
There is a textbook that we use in the first 6 lectures of the course:
· E. ANGNER, A Course in Behavioral Economics. Palgrave Macmillan, 2012;
and a textbook that we will partially follow in lectures 7 and 8:
· P. G. MOFFATT, Experimetrics: Econometrics for experimental economics. Palgrave Macmillan, 2015.
Finally, for lectures 912 devoted to an introduction to (psychological) game theory we will use some chapters/sections of the lecture notes:
· P. BATTIGALLI, Game Theory: Analysis of Strategic Thinking, mimeo;
and the following survey, which also contains many relevant references to theoretical and experimental work:
· P. BATTIGALLI and D. DUFWENBERG, “BeliefDependent Motivations and Psychological Game Theory,” IGIER w.p. 646 (2019).
Complementary lecture notes and/or slides will be distributed.