The Cologne Laboratory for Economic Research is concerned with the empirically based further development of economic theories and the applied analysis of economic and social institutions. The goal of experimental economic research with the help of interactive, economic decision-making experiments is to better understand human decision-making behaviour. Often, the predictions of economic theories are tested and further developed in experiments. Other experiments test real or envisaged institutions in the "wind tunnel", so to speak. Laboratory experiments are also used to train students and practitioners.
At the Cologne Laboratory for Economic Research, a wide range of economic research questions are dealt with. A network consisting of 68 computers is available for this purpose. This makes our laboratory one of the most modern and largest of its kind in Germany. In addition, our laboratory offers the possibility of carrying out experiments completely digitally using world-leading software. This allows precisely controlled situations to be simulated and observed. In this way, important conclusions can be drawn about the nature of economic behaviour as well as about the performance of markets and other institutions. Ultimately, the research goal is to develop modern, practical algorithms for new and improved marketplaces and other economic and social institutions.
In the Cologne laboratory, fundamental postulates of economic behavioural theory are challenged and further developed through the collection of empirical data. What motives influence economic behaviour? In what way does the rationality of the real decision-maker differ from that of the homo economicus who populates the economic model worlds?
In a complementary research focus, the extent to which the limits of cognitive abilities and egoistic motivations are decisive for understanding real economic behaviour is investigated. The aim is to better understand and model the reciprocal effects of social preferences and bounded rationality on the one hand and the architecture of economic rules and regulations on the other.
In the "design" of the experiment, the underlying "game", its parameters and the monetary incentives are specified. Preferences, technologies and other economically relevant parameters can be perfectly induced and controlled. Often, only one parameter is changed between two arrangements to be compared. As a result, changes in the behaviour of the test subjects can be traced back to precisely this one parameter.
The data generated in the experiment are evaluated using economic theory, statistical and econometric methods. Unexpected results are often checked in further set-ups. The results and conclusions are typically published in research papers.