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Institutional Economics strives for understanding how the "rules of the game" induced by the institutional setting shape individual behavior, and how the institutional setting is shaped by the interaction of different economic actors. We contribute to this research using formal-theoretical methods.

  • Research on research

    The research contributes to understanding how the credibility and usefulness of the research results are affected by different institutional aspects implicit in the generation and communication of research activities.

    In their paper “Preselection and expert advice” Mike Felgenhauer and Elisabeth Schulte study the effects of the introduction of a preselection stage into an information processing process. The implementation of a desk-rejection policy at journals with a peer-review process is an example for the introduction of such a preselection stage. The paper shows that desk-rejections may have unintended consequences on the quality of the peer-reviewing process. Due to the survival of the desk-rejection stage, a referee becomes more optimistic about the paper's quality and may bias the recommendation to the detriment of the decision quality.

    Link to the paper 

    In their paper “Strategic private experimentation” Mike Felgenhauer and Elisabeth Schulte address the question whether an interested party can convince a decision maker by presenting evidence that has been acquired with costly experimentation. If experimentation is too cheap relative to the stakes of the interested party, it is not possible to persuade the decision maker. If experiments are sufficiently costly, a decision maker that is sufficiently unbiased can be persuaded. The findings explain why the scientific community is averse to accepting methods that appear to be “cheap”, even though they may generate informative experiments. Such methods may induce excessive experimentation, which dilutes the informative value of the research.

    Link to the paper 

    In their paper “Contracting with researchers” Matthias Verbeck and Elisabeth Schulte derive a bias for mainstream research in a contract-theoretical setting with limited observability of researchers' activities. A diversification of research activities, i.e., using more and less promising research technologies at the same time, is too costly if a researchers' technology choice is unobservable.

    Link to the paper 

    Workshop on the "Design of Institutions for Science and the Credibility of Empirical Research"

    On Dec 6 & 7 2019, we hosted an international workshop on the "Design of Institutions for Science and the Credibility of Empirical Research"
    In the past decade some failures to reproduce important empirical results have led to an erosion of trust in scientific method, prompting talks of a ‘credibility crisis’ in science. These problems have been observed across scientific disciplines, in the life sciences as well as in the behavioral and social sciences. In response to these concerns learned societies and journals in many scientific disciplines are introducing new policies and rules, such as pre-registration, more demanding disclosure standards, data and material sharing and encouraging replications. The workshop aimed at promoting a rigorous analysis of the incentive effects and the effectiveness of such policies.

    Click here to see the program.

  • Research on rules for collective decision making

    The research contributes to understanding how the outcome of a collective decision making process is shaped by the rules governing it, and how the rules effectively balance between the achievability of collectively desirable outcomes and the preservation of individual interests.

    In their paper “Legitimacy of mechanisms for public good provision” Pierre Boyer, Yukio Koriyama and Elisabeth Schulte consider a deliberation stage prior to deciding the provision of a public good with the help of the mechanism proposed by d’Aspremont and Gérard-Varet (1979). They find that the deliberation stage cannot legitimize the collective decision. It is impossible to communicate meaningfully before being exposed to the mechanism.

    Link to the paper

  • Research on rules on markets

    The research considers topical aspects that are relevant for the interaction on markets. It contributes to understanding to what extent institutional change on markets requires an adjustment of regulatory interventions. In their paper “Optimal incentives for patent challenges in the pharmaceutical industry” the authors Enrico Böhme, Severin Frank, and Wolfgang Kerber analyze the regulator’s trade-off between limiting the delaying of generic entry through patent settlements and giving generic firms more incentives for challenging weak patents held by originator firms. They show that allowing patent settlements with a delayed market entry of generics, i.e. settlements which explicitly allow firms to collude, can be a welfare-maximizing policy.

  • Publications

    Please refer to the team member’s websites:

    Prof. Dr. Elisabeth Schulte

    Dr. Enrico Böhme

    Matthias Verbeck