SFB TRR 190 - Teilprojekt B 07

Title: Regulation and Taxation of Financial Markets

Description: 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.