Experimental economics

This course will cover a number of key questions and techniques of experimental economics.

During the course of this seminar we will discuss and practice various aspects of using experimental methods in economics, including

● Judging if experiment is a suitable tool to answer research questions at hand

● Designing experiments:

o Field vs. lab

o Online vs. offline but computerized vs. pen&paper

o One-time vs. repeated decision; types of group matching

o Treatment: blocking/controlling and randomizing; level of randomization; factorial designs

o Econs’ tricks: BDM, strategy method, random lottery incentive system, conditional information lottery…

● Determining the sample: desirable subject pool and sample size (power calculations)…

● Writing experimental instructions

● Programing experiments

● Analysing experimental data

● Writing papers based on experiments

The substantive areas to which these will be applied will depend on participants’ interests but may include:

● Biases in judgment and decision making

● Decision making under risk and uncertainty

● Time preference and self-control

● Social/distributional preference

● Strategic games

● Bargaining and negotiations

● Markets

● Gender and discrimination

The Handbook of Experimental Economics, John Kagel and Alvin E. Roth, editors, Princeton University Press, 1995.

Colin Camerer, Behavioral Game Theory: Experiments in Strategic Interaction, Princeton University Press, 2003.

Bardsley, Nicholas, et al. Experimental economics: Rethinking the rules. Princeton University Press, 2010.

… and numerous journal articles.

The students will become

familiar with the methods of experimental economics (P8S_WG)

able to apply them in their own research agenda (P8S_UW)

aware of the responsibility towards the participants of experiments, the research community and society at large (P8S_KO, P8S_KR)

The students will be required to design an experimental study and hand in a stub of a paper, including abbreviated introduction/motivation and literature review, detailed design & procedures/methods section. They will also be required to conduct a pilot or manipulation check for the experiment.

Overview of the Lectures: The focus of the module is on how one designs economics experiments. This is for two reasons. First, because of the form of the assessment, in which you have to design an experiment, on a topic of your own choosing (with my advice) if you choose to be assessed by a Group Project, or on a topic of my choosing if you choose to be assessed by examination. I would strongly recommend the former (and this is what most students have opted for in previous years): you will learn a lot more and get excited. In the past, students have chosen some really interesting projects. The second reason is pedagogical: you will learn more by thinking right from the beginning about how one designs an experiment, rather than being shown experiments that have already been carried out. I will put some structure on the lectures, dividing experiments up into three types: market experiments, interactive experiments and individual experiments. I will cover them in this order. We will concentrate on: what it is that is being investigated, or tested; how one designs an experiment to investigate or test it; how one implements it - either with pen or paper or computerised; how one writes the instructions for the subjects; how many subjects and how many decision problems one should have; how one analyses the data generated; and how one writes up the results. I should note that, while put up some PowerPoints on the VLE site, they mainly consist of a series of questions; the answers will be provided in the lectures. So you cannot successfully complete the module unless you attend all the lectures. As the module proceeds, if you are going to be assessed by a Group Project, you should start thinking early about who will be in your group, and what will be the topic under investigation. I will help you with the latter - and you should start thinking soon. I should note that groups are self-forming and self-policed.

Overview of the Seminars: The seminar programme will partly involve students participating in experiments and partly in designing their own.

Aims:

• To expose the students to the subject of Experimental Economics and to give an insight into how experiments can tell us something about human behaviour. The course will not attempt to give a comprehensive overview of experimental economics.

Objectives:

• Know the terminology used in Experimental Economics.

• Be knowledgeable of the use of experimental methods in different areas of Economics

• Know how to use experimental methods to study an economic question.

• To get some feeling of the types of topics in economics that can be studied using experimental methods.

Assessment:

There will be a 2-hour unseen examination at the beginning of the Spring Term. Alternatively students can opt to be assessed by a Group Project, in which self-selected and self-policing groups prepared a project, under my supervision, and submit it for assessment. All students in any one group get the same mark. The deadline for submission of the Group Projects is Monday of Week 5 of the Summer Term. Students wanting to be assessed by Group Project should tell the Receptionist in the Economics Department by Friday of Week 10 of the Autumn Term at the latest.

References (none of which are compulsory. Advice on reading will be given on the VLE site):

Bardsley, N. et al (2009). Experimental Economics. Princeton University Press.

Camerer, C. F. (2003). Behavioural Game Theory: Experimental Studies of Strategic Interaction. Princeton University Press.

Carbone, E. (2007). New Development in Experimental Economics. Edward Elgar.

Chaudhuri, A. (2009). Experiments in Economics. Routledge.

Davis, D. D. & Holt, C. A. (1993). Experimental Economics. Princeton University Press.

Friedman, D. & Sunder, S. (1994). Experimental Methods: A Primer for Economists. Cambridge University Press.

Hey, J. D. (1991). Experiments in Economics. B. Blackwell.