Experiments in economics involve gathering human subjects in a classroom or a computer laboratory, presenting them with a situation and making them take decisions that are monetarily incentivised. These decisions will later be analysed statistically or econometrically to yield results that confirm, but also challenge, predictions of economic theory, thereby expanding the boundaries of knowledge regarding human economic behaviour and its motives.
An Introduction to Experimental Economics details the methodology, procedure and protocol to be followed while conducting experiments in economics. It draws the contours of the newly emerging discipline through the main areas where experiments are being used:
· games involving strategic decisions where there are two players and the decision of one player is contingent upon how she expects the other player to behave,
· public goods games designed to test the existence of the free rider problem through a voluntary contributions mechanism, and
· games involving a choice between two or more lotteries that explain decision-making under conditions of uncertainty.
A unique feature is the discussion on experiments designed to elicit the impact of community, caste, religion and multiplicity of culture, based on the author’s rigorous work in the field. Written in simple language, and with practical applications in mind—a chapter is devoted on how to use z-Tree, an open source software which can be used to effectively run experiments in a lab—this book will interest students and scholars of economic theory and its empirical verification.
Gautam Gupta is Professor, Department of Economics, Jadavpur University, Kolkata.
List of Tables, Boxes and Figures
List of Abbreviations
Acknowledgements
Publisher’s Acknowledgements
Introduction to Experimental Economics
Early Beginnings in Experiments
Advantages of Experiments
Some Recent Applications of Experiments in Economics
Experiments Outside a Computer Laboratory
Uses of Experiments in Economics
The Philosophy of Experimental Economics
Note on the Organisation of the Volume
Experiments with Games of Strategic Choices
Prisoner’s Dilemma in Experiments
The Ultimatum Game: Altruism or Fairness
Checking for Altruism: The Dictator Game
Motivating Fairness: The Trust Game
Rationality and Backward Induction: The Centipede Game
The Coase Theorem and Bargaining Solutions
Experiments with Public Goods
The Free Rider Problem in Public Goods
The Voluntary Contributions Mechanism
Results from the First Experiment with Public Goods
Variations of the Public Good Game
Voting for a Public Good
Individual Decisions under Uncertainty
Review of Expected Utility Theory
Individual Choice under Uncertainty: The Allais Paradox
Common Ratio Lotteries
Probability Triangle Representations
Attitude towards Risk
Some Important Lottery Choice Experiments
Various Types of Experimental Designs
The Field Experiment
Experiments across Regions and Cultures
Experiments Involving Gender, Religion and Class
Field Experiments with Subjects having a Common Lived Experience
The Public Goods Game in the West Bengal Sundarbans
The Public Goods Game in the Sundarbans in Bangladesh
Natural Field Experiments
Non-Monetised Experiments
The Methodology and Protocol of Experimental Economics
Experimental Methods
The Protocol of Experiments in Economics
Choosing the Venue
Recruiting Subjects
Delivering the Instructions
Running the Experiment
Monetary Incentives for the Experiment
Consent and other Ethical Issues
Follow Up
Use of Deception
Building a Computer Laboratory
Introduction to Programming using z-Tree
Programming
Adding a New Stage
Declaring Variables
Input and Output
Programming a Public Goods Experiment
Conditional Statements and Sequential Experiments
Programming an Ultimatum Game
Executing a Programme
Weblinks and Programming without z-Tree
Some Useful Function Commands
Bibliography