The Cologne Laboratory for Economic Research focuses on the empirically guided advancement of economic theories as well as the analysis of economic and social institutions. Additionally, laboratory experiments are employed in teaching. The experimental research aims to deepen the understanding of human decision making through testing and refining the predictions of economic theory. Real or conceivable institutions can also be tested in experiments since the precisely controlled setting enables their examination in a "wind tunnel".
The Cologne laboratory investigates a wide range of issues. For example, which fundamental motives influence behavior in economically relevant situations. Or, how the rationality of real decision-makers differs from that of the homo economicus that populates the world of economic models.
In a complementary research area, the extent to which cognitive limitations and selfish motives influence real economic behavior is addressed. On the one hand, the goal is the investigation of the interaction between social preferences and bounded rationality. On the other hand, the research aims to understand and model the architecture of economic rules and regulations.
With a network consisting of 68 computers, the Cologne laboratory is one of the largest and most modern of its kind in Germany. By using world-leading software, it offers the possibility to perform interactive experiments completely digitally and to observe precisely stimulated situations. In addition to the laboratory, experiments are currently being conducted increasingly online.
The "design" of an experiment means the specification of the underlying "game", its parameters and the monetary incentives. Preferences, technologies and other economically relevant parameters can be perfectly induced and controlled. In many cases, only one parameter is changed to compare two different situations. Thus, changes in the participants' behavior can be traced back to exactly this parameter.
This allows important conclusions to be drawn about the nature of economic behavior and about the performance of markets and other institutions. The research goal is to develop modern, practical algorithms to improve marketplaces and other economic or social institutions.