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 "Rationality and Competition" combines approaches from "behavioral" and "neoclassical" economics to analyze applied economic issues and to develop policy solutions that are robust to deviations from perfectly rational behavior. Behavioral economics is a dynamic field that develops new approaches at a high rate. It has traditionally focused on non-standard preferences, such as loss aversion, present bias or social preferences, but recent research has emphasized that biases in beliefs and cognition, such as motivated beliefs and overconfidence, are also of major importance. The CRC is at the forefront of this development and will continue its work on combining new basic concepts with economic applications. The CRC is also evolving in terms of its methods. Having relied on laboratory and field experiments for a long time, behavioral economics now shifts towards more online experiments and surveys. Again, the CRC has been a driver of this transition and will continue in this role. It will also continue to work with observational data, benefitting from ever-growing data sets and from novel statistical methods, and exploring new ways to combine the above-mentioned tools. The CRC has a broad research portfolio including work packages in the economics of education, public economics, health economics, labor economics, environmental economics, industrial organization, market and mechanism design, economic geography, marketing, economic history and parts of macroeconomics. In each of these fields, the combination of neoclassical and behavioral insights has proven highly valuable. In its second funding period, the CRC has made many scientific contributions, reflected in hundreds of research papers, many published in top journals, and other outputs. The CRC’s balance sheet has improved significantly compared to the already very successful first funding period. As was planned from the beginning of the CRC, the third funding period will see an increased focus on economic policy applications, and we are adjusting some of our research strategies accordingly. Our previous work has highlighted policy-relevant research areas that need to be explored in greater depth, notably innovation and artificial intelligence, climate policy, inequality and design of social policies, and the location decisions of firms and workers. These issues will be at the center of many economic policy debates in the next decade, and the CRC team has adjusted its composition in order to reflect the new foci, to develop behaviorally robust economic policy recommendations for them, and to further contribute to the general goal of overcoming the scholarly division between behavioral and neoclassical economists.

• 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 ;  Wiederholt, Mirko )
• A04 - Biases and decision impairments in markets (Project Heads Friedrichsen, Jana ;  Ivanova-Stenzel, Radosveta ;  Kocher, Martin ;  Ronayne, Ph.D., David ;  Schudy, Simeon )
• A05 - Transparency and product choice in Digital Environments (Project Heads Guhl, Daniel ;  Klapper, Daniel ;  Spann, Martin )
• A06 - Educational choices, market design and student outcomes (Project Heads Kübler, Dorothea ;  Radbruch, Jonas ;  Wößmann, Ludger )
• A07 - Dynamics of cultural and economic heterogeneity (Project Heads Fitzenberger, Ph.D., Bernd ;  Helm, Ph.D., Ines ;  Kosse, Fabian ;  Spitz-Oener, Alexandra ;  Sunde, Uwe )
• A09 - Family policy, gender, and redistribution: Impacts, social preferences, and design (Project Heads Hansen, Emanuel ;  Jayaraman, Ph.D., Rajshri ;  Peichl, Andreas ;  Sachs, Dominik )
• B01 - Competition, incentives and belief formation (Project Heads Murooka, Takeshi ;  Schmidt, Klaus ;  Tripodi, Ph.D., Egon ;  Le Yaouanq, Yves )
• B02 - Optimal dynamic contracting, enforcement and ambiguity (Project Heads Horst, Ulrich ;  Lang, Matthias ;  Strausz, Roland )
• B04 - Firms, technological change and institutions for innovation (Project Heads Gumpert, Anna ;  Harhoff, Dietmar ;  Schnitzer, Monika ;  Steinwender, Ph.D., Claudia )
• B05 - Incentives, leadership and work organization (Project Heads Danilov, Anastasia ;  Englmaier, Florian ;  Jayaraman, Ph.D., Rajshri ;  Schöttner, Anja )
• B07 - Overconfidence and the regulation of financial institutions (Project Heads Haufler, Andreas ;  Heinemann, Frank )
• B08 - Policy Preferences and Identities (Project Heads Cantoni, Ph.D., Davide ;  Ornaghi, Ph.D., Arianna ;  Wolf, Nikolaus )
• B09 - Assortative matching and the allocation of talent (Project Heads Falck, Oliver ;  Nimczik, Jan Sebastian ;  Waldinger, Fabian )
• B10 - Location decisions of firms (Project Heads Ahlfeldt, Gabriel M. ;  Falck, Oliver ;  Flach, Lisandra )
• INF - Information Infrastructure Project (Project Heads Englmaier, Florian ;  Falck, Oliver ;  Fitzenberger, Ph.D., Bernd ;  Greven, Sonja ;  Haan, Peter ;  Weizsäcker, Ph.D., Georg ;  Wichert, Sebastian ;  Winter, Joachim )
• Z - Central 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 )
• B06 - Product market competition and wage formation (Project Heads Eckel, Carsten ;  Felbermayr, Ph.D., Gabriel ;  Flach, Lisandra )

• Applicant Institution: Ludwig-Maximilians-Universität München
• Participating University: European School of Management and Technology Berlin; Hertie School; The University of Governance in Berlin; 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: Humboldt-Universität zu Berlin
• Spokespersons: Professor Dr. Klaus Schmidt, since 1/2025; Professor Georg Weizsäcker, Ph.D., until 12/2024