Institutional Design and Economic Preferences: THeory and experiments (INDEPTH)

Type of project: Institutions
Contract dates: 2018 - 2021
Équipe(s): GOAL
Responsable scientifique LIRIS: Eric Duchene
Partenaire(s): Centre de Neuroscience Cognitive, Groupe d'Analyse et de Théorie en Economie

INDEPTH is a breakthrough project that aims at contributing to the “BioHealth and Society” challenge of IDEXLYON. Our ambition is to address major economic and societal issues related to the design of institutions able to sustain efficient economic transactions, fostering fair social interactions, and promoting cooperation in human organizations. We define institutions as either formal (e.g., markets, laws, incentives, sanction regimes) or informal (e.g., behavioral norms, habits, culture) structures and mechanisms that define the rules, boundaries and beliefs about actions within a community: when and how one ought to act, how one can or cannot behave, what kind of beliefs one holds about others' behaviors. Institutions are crucial for shaping human interactions, securing social cohesion, regulating individual and collective behavior and nurturing trust; as such, they determine the ability of our modern societies to cope with the unprecedented challenges they are facing (e.g., recent financial, environmental and humanitarian crises). INDEPTH makes several breakthrough contributions in the design and evaluation of institutions, from both a normative (discussing desirable normative criteria) and a positive perspective (how to promote cooperation, efficiency, and democratic values). The novel and multidisciplinary agenda of INDEPTH allows us to investigate the behavioral foundations of these institutions and their causal impact on the evolution of moral and social preferences from a theoretical and an empirical standpoint. - Combining mathematics and economics helps to develop axiomatic foundations of social rules and norms, and the construction of institutional mechanisms that account for human preferences and biases. Our approach of mechanism design is novel because i) cooperative game theory is used to model constraints on the coalition formation and strategic interactions, ii) behavioral economics enriches this analysis by incorporating psychological biases and bounded rationality. - Combining behavioral and experimental economics allows us to investigate how institutions in turn shape individual and social preferences, within and across different decision-making contexts. This is innovative, as most of the literature has explored the impact of social preferences on institutions and their dynamics, leaving aside the effects of institutions on social preferences. - Combining neuroscience and behavioral economics allows us to uncover the neural, physiological and emotional bases of the interplay between institutions and preferences when people decide to comply with rules and norms or to violate them. The novelty is to explore the causal effects of specific brain regions on the investigated mechanisms, and the causal impact of institutions on compliance.