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What is Experimentation in Behavioral Economics?
Experimentation is a core method in behavioral economics used to test theories and understand how people make decisions in real-world settings. Behavioral economists conduct experiments, often in controlled environments, to observe how individuals behave under different conditions, uncovering the cognitive biases and heuristics that drive decision-making.
Key Concepts of Experimentation in Behavioral Economics
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Field Experiments
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🏙️ Experiments conducted in natural environments to observe real behavior rather than relying on self-reports.
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Example: Studying how default options in organ donation forms impact actual registration rates in different countries.
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Laboratory Experiments
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🧪 Controlled experiments conducted in a lab setting to isolate variables and measure behavioral responses.
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Example: Testing how people’s spending changes when they are presented with cash versus credit cards.
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Randomized Controlled Trials (RCTs)
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🎯 Participants are randomly assigned to different groups to test specific interventions.
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Example: Testing whether small financial incentives encourage people to exercise more by randomly assigning participants to receive or not receive the incentives.
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How Are Experiments Conducted in Behavioral Economics?
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Step 1: Identify a hypothesis or question.
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🧪 For Lab Experiments: Set up a controlled environment to observe behaviors and test the hypothesis.
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Step 2: Conduct a field experiment or RCT in real-world settings.
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🏙️ Field experiments are used to observe real-world behaviors.
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Step 3: Analyze results to understand how biases and heuristics influence decision-making.
Experimentation in Behavioral Economics
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Field Experiments
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🏙️ Real-world settings to observe behaviors.
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Laboratory Experiments
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🧪 Controlled settings to isolate variables and study behaviors.
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Randomized Controlled Trials (RCTs)
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🎯 Random assignment to test interventions.
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