Behavioral Econometrics for Psychologists

We make the case that psychologists should make wider use of structural econometric methods. These methods involve the development of maximum likelihood estimates of models, where the likelihood function is tailored to the structural model. In recent years these models have been developed for a wide range of behavioral models of choice under uncertainty. We explain the components of this methodology, and illustrate with applications to major models from psychology. The goal is to build, and traverse, a constructive bridge between the modeling insights of psychology and the statistical tools of economists. † Centre for Economic and Business Research, Copenhagen Business School, Copenhagen, Denmark (Andersen); Department of Economics, College of Business Administration, University of Central Florida, USA (Harrison and Rutström) and Department of Economics and Finance, Durham Business School, Durham University, United Kingdom (Harrison and Lau). E-mail: [email protected], [email protected], [email protected], and [email protected]. Harrison and Rutström thank the U.S. National Science Foundation for research support under grants NSF/IIS 9817518, NSF/HSD 0527675 and NSF/SES 0616746, and we all thank the Danish Social Science Research Council for research support under project #24-02-0124. An earlier version was presented by Harrison as an invited lecture at the Annual Conference of the French Economic Association: Behavioral Economics and Experimental Economics, Lyon, May 23-25, 2007, and we are grateful for the invitation, hospitality and comments received there. We are also grateful for comments from Daniel Read.