What’s the relationship between behavioral and experimental economics?

[eggman]

What’s the relationship/difference between behavioral and experimental economics? Are they two terms for the same concept, or if not what are their similarities and differences? Thanks

[KGkhan23]

Hi eggman. I haven't taken a behavioral class yet but I just finished experimental. We referred to behavioral economics a bit towards the end with topics such as bounded rationality, altruism, etc., but the main focus of the class was on testing theories and comparing different market structures. There was a lot of emphasis on how to properly run experiments, induce values and whatnot. Check out these links:

Behavioral economics - Wikipedia, the free encyclopedia
and
Experimental economics - Wikipedia, the free encyclopedia

Hope that helps.

[jenizaro]

Behavioral economics: explore when (empirics) and why (theory) observed behavior of economic agents deviates from the rational paradigm.

Experimental economics: setting up situations under controlled conditions to study real people responses to economic incentives and relate these responses to theory (of neoclasical or behavioral kind).

[ICECOLDECON]

From Bill Harbaugh at UOregon:

Behavioral economics consists of a variety of alternatives to the rational choice model of behavior. For example, behavioral economists have developed “hyperbolic discounting” models of choice over time. They argue that these models, are better at describing actual behavior in areas such as retirement savings accumulation and addiction than the standard constant discount rate models are. Another example would be fairness. People seem to want to be nice to people who are nice to them, and mean to people who are mean. Behavioral models that incorporate these preferences lead to some interesting predictions about behavior and equilibria.


Experimental economics is a methodology – instead of testing theories using the sort of happenstance data that most empirical economists use, experimentalists get their data from experiments under controlled conditions. We use cash payoff so that people’s decisions have real consequences, just like decision outside the lab do. I like to say that experimental economists are producers of data, not just consumers of it.


Experiments are often used to test between behavioral models and to compare them with standard models. But there is no necessary relationship – some experimental economists are interested in behavior in situations where game theory does not predict unique equilibria, for example. Others are interested in predicting how people will behave under various market institutions – for example, the recent FCC spectrum auctions. Others believe that the anomalies behavioral economists claim to have identified are not general enough to bother with, perhaps because they believe they tend to go away with learning, or in situations where the stakes are higher.