B07
Regulation and Taxation of Financial Markets
Summary

Project summary

Project B07 aims to investigate how regulation and tax policies shall be conducted in financial markets when bounded rationality and moral-hazard problems interact. In a first step we use laboratory experiments to ask whether risk-taking decisions by overconfident traders are further reinforced by the existence of moral hazard, and which regulatory regime is best suited to curb overly risky decision-making. The results from these experiments are then applied to compare alternative policy tools with respect to their effects on both the stability and the efficiency of financial markets.