TRR 190:  Rationality and Competition: The Economic Performance of Individuals and Firms

• Subject Area: Social and Behavioural Sciences
• Term: since 2017
• Website: Homepage
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 280092119

The CRC TRR 190 “Rationality and Competition” combines methods and insights from “behavioral” and “neoclassical” economics to better understand important applied economic problems and to reach more robust economic policy conclusions.The CRC addresses two sets of questions. First, questions about method: How can we use the existing, often rather conceptual insights about behavioral deviations from standard theory and apply them to the traditional fields of economic analysis? Are the existing empirical or experimental demonstrations of behavioral biases – such as reference-dependent preferences, over-confidence, or social preferences – ready to use? Do they capture relevant aspects of economic behavior in real world settings, in particular in competitive environments, where market forces punish irrational behavior?Second, questions about substance: In what areas of economic research is it necessary to engage with a richer model of decision making? In what areas are traditional concepts sufficient? Is the nature of the transmission mechanism the same in both analyses? Do the existing empirical demonstrations of behavioral biases have implications of large economic significance?In the first funding period, the CRC has made important contributions to this research agenda, documented in hundreds of publications and research papers in both basic and applied research. Our work program in the second funding period builds on these results – with a few adjustments: First, we identified several highly promising fields that require more attention, including innovation, inequality, and gender economics. Second, the CRC will also highlight several important new methodical questions, in particular the analysis and measurement of biased beliefs and how to operationalize the notion of “identity”.

• DFG Programme: CRC/Transregios

Current projects

• A01 - Heterogeneity of expectations and biases in individual choices (Project Heads Engelmann, Dirk ;  Winter, Joachim )
• A02 - Biased beliefs in dynamic decisions: extensions to policy and communication (Project Heads Breunig, Christoph ;  Haan, Peter ;  Weizsäcker, Ph.D., Georg )
• A04 - Biases and decision impairments in markets (Project Heads Friedrichsen, Jana ;  Ivanova-Stenzel, Radosveta ;  Kocher, Martin ;  Schudy, Simeon )
• A05 - Transparency and product choice (Project Heads Klapper, Daniel ;  Spann, Martin )
• A06 - Educational choices, market design, and student outcomes (Project Heads Kübler, Dorothea ;  Wößmann, Ludger )
• A07 - Determinants and consequences of cultural heterogeneity (Project Heads Fitzenberger, Ph.D., Bernd ;  Kosse, Fabian ;  Spitz-Oener, Alexandra ;  Sunde, Uwe )
• A09 - Family policies and redistribution: Impacts, perceptions and optimal design (Project Heads Peichl, Andreas ;  Sachs, Dominik )
• B01 - Competition, incentives, and belief formation (Project Heads Murooka, Takeshi ;  Schmidt, Klaus ;  Le Yaouanq, Yves )
• B02 - Optimal dynamic contracting, enforcement, and ambiguity (Project Heads Horst, Ulrich ;  Lang, Matthias ;  Strausz, Roland )
• B04 - Firm size, organization, and innovation (Project Heads Gumpert, Anna ;  Harhoff, Dietmar ;  Schnitzer, Monika )
• B05 - Incentives, leadership, and work organization (Project Heads Danilov, Anastasia ;  Englmaier, Florian ;  Jayaraman, Ph.D., Rajshri ;  Schöttner, Anja )
• B06 - Product market competition and wage formation (Project Heads Eckel, Carsten ;  Felbermayr, Ph.D., Gabriel ;  Flach, Lisandra )
• B07 - Regulation and taxation of financial markets (Project Heads Haufler, Andreas ;  Heinemann, Frank )
• B08 - Changing preferences: identity and ideology in the long run (Project Heads Cantoni, Ph.D., Davide ;  Wolf, Nikolaus )
• B09 - Professional networks and high-skilled migration – The historical and contemporaneous perspective (Project Heads Falck, Oliver ;  Waldinger, Fabian )
• INF - Information Infrastructure Project (Project Heads Englmaier, Florian ;  Falck, Oliver ;  Fitzenberger, Ph.D., Bernd ;  Greven, Sonja ;  Weizsäcker, Ph.D., Georg ;  Winter, Joachim )
• Z - Administrative Project (Project Heads Schmidt, Klaus ;  Weizsäcker, Ph.D., Georg )

Completed projects

• A03 - Behavioral biases, financial literacy and competitiveness in credit markets (Project Head Menkhoff, Lukas )
• B03 - High-Frequency Interaction in Oligopoly Markets (Project Head Huck, Steffen )

• Applicant Institution: Humboldt-Universität zu Berlin
• Participating University: Technische Universität Berlin
• Participating Institution: Deutsches Institut für Wirtschaftsforschung (DIW); Max-Planck-Institut für Innovation und Wettbewerb; Wissenschaftszentrum Berlin für Sozialforschung gGmbH (WZB); ifo Institut - Leibniz-Institut für Wirtschaftsforschung; an der Universität München e. V.
• Co-Applicant Institution: Ludwig-Maximilians-Universität München
• Spokespersons: Professor Dr. Klaus Schmidt, until 12/2020; Professor Georg Weizsäcker, Ph.D., from 1/2021 until 12/2024