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Behavioral Economics

Oberserving Behavior Realistically

There is often a surprising discrepancy between self-evaluation, theoretical predictions, and actual behavior. Experimental studies in behavioral economics underscore this reality. Behavioral economics attempts to gain a more realistic picture of human behavior by using indirect surveys and real monetary incentives.  

One characteristic of behavioral economics is that human behavior is directly observed in particular economic situations without the necessity of potentially biased self-assessments. On the other hand, human behavior is not predicted based on very specific and artificial assumptions. Behavioral economics uses experimental studies to determine what circumstances cause people to act in ways that contradict these theoretical models using experimental studies.

Controlled variation of a single aspect of the economic games – while keeping all others the same – can be used to establish the reasons behind certain behaviors. To keep the results as general as possible and not only valid for a particular situation, mostly abstract game-like scenarios are used which still contain the structure of the economic decision.

Behavioral economic methods can also be used for issues relevant to market research, for instance to establish which factors determine trust between market players, how reputation develops, or what influences investment decisions.

To understand the factors determining trust between market players, especially between market players from different countries, we initiated a joint project with the University of Erlangen-Nuremberg.

We conducted an experimental study among European citizens regarding cross-cultural perceptions related to trust in two dimensions: volunteerism and honesty. We use representative samples from five major economies of the Euro area: France, Germany, Italy, the Netherlands, and Spain.

We found that European citizens rely on nationality to infer behavior. When assessing the behavior of others, people tend to show a north/south pattern: participants from northern countries are perceived to be more honest and to provide more effort in a volunteering task than participants from southern countries. Actual behavior, in contrast, is not always in line with these assessments.

Publications:

Dieckmann, A., Grimm, V., Unfried, M., Utikal, V., and Valmasoni, L. (2016). Trust and beliefs among europeans: cross-country evidence on perceptions and behavior. European Economic Review. 90, 225-253.

Cooperation partners:

Prof. Dr. Veronika Grimm
(University of Erlangen-Nuremberg)

Prof. Dr. Verena Utikal
(University of Erlangen-Nuremberg)