Ohio State: ECON 8877: Experimental Economics Methods: P.J. Healy

This course will cover the methodological issues involved in running an experiment in the traditions and norms of experimental economics.

Assignments

Topics Covered

Below are the topics covered in this course, along with lecture slides and suggested readings.

Vernon Smith's Precepts

Smith, V.L., 1976. Experimental Economies: Induced Value Theory. American Economic Review 66, 274–279.

Smith, V.L., 1982. Microeconomic Systems as an Experimental Science. The American Economic Review 72, 923–955.

History: Roth & Ledyard's Surveys

Roth, A.E., 2020. Introduction to Experimental Economics, in: The Handbook of Experimental Economics. Princeton University Press, pp. 1–110. https://doi.org/10.1515/9780691213255-003

Thurstone, L.L., 1931. The Indifference Function. The Journal of Social Psychology 2, 139–167. https://doi.org/10.1080/00224545.1931.9918964

Rousseas, S.W., Hart, A.G., 1951. Experimental Verification of a Composite Indifference Map. Journal of Political Economy 59, 288–318. https://doi.org/10.1086/257092

Mosteller, F., Nogee, P., 1951. An Experimental Measurement of Utility. Journal of Political Economy 59, 371–404. https://doi.org/10.1086/257106

De Herdt, T., 2003. Cooperation and fairness: the flood–Dresher experiment revisited. Review of Social Economy 61, 183–210. https://doi.org/10.1080/0034676032000098219

Schelling, T.C., 1957. Bargaining, communication, and limited war. Conflict Resolution 1, 19–36. https://doi.org/10.1177/002200275700100104

Suppes, P., Atkinson, R.C., 1960. Markov learning models for multiperson interactions, Markov learning models for multiperson interactions. Stanford Univer. Press, Palo Alto, CA, US.

McClosky, J.F., 1961. The Analyst’s Bookshelf (Review of Suppes \& Atkinson). Operations Research 9, 587–599. https://doi.org/10.1287/opre.9.4.587

Chamberlin, E.H., 1948. An Experimental Imperfect Market. Journal of Political Economy 56, 95–108. https://doi.org/10.1086/256654

Smith, V.L., 1962. An Experimental Study of Competitive Market Behavior. Journal of Political Economy 70, 111–137. https://doi.org/10.1086/258609

Plott, C.R., 1982. Industrial Organization Theory and Experimental Economics. Journal of Economic Literature 20, 1485–1527.

Plott, C.R., Sunder, S., 1982. Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models. Journal of Political Economy 90, 663–698. https://doi.org/10.1086/261084

Siegel, S., Fouraker, L.E., 1960. Bargaining and group decision making: Experiments in bilateral monopoly, Bargaining and group decision making: Experiments in bilateral monopoly. McGraw-Hill, New York, NY, US.

Ledyard, J.O., 1995. Public Goods: A Survey of Experiemntal Research, in: Kagel, J., Roth, A. (Eds.), Handbook of Experimental Economics. Princeton University Press, Princeton, NJ.

Marwell, G., Ames, R.E., 1981. Economists free ride, does anyone else?: Experiments on the provision of public goods, IV. Journal of Public Economics 15, 295–310. https://doi.org/10.1016/0047-2727(81)90013-X

Isaac, R.M., McCue, K.F., Plott, C.R., 1985. Public goods provision in an experimental environment. Journal of Public Economics 26, 51–74. https://doi.org/10.1016/0047-2727(85)90038-6

Isaac, R.M., Walker, J.M., Thomas, S.H., 1984. Divergent evidence on free riding: An experimental examination of possible explanations. Public Choice 43, 113–149. https://doi.org/10.1007/BF00140829

Decision Theory: A Primer

Von Neumann, J., Morgenstern, O., 1944. Theory of Games and Economic Behavior, 3rd ed. Princeton University Press, Princeton, NJ.

Savage, L.J., 1954. The Foundations of Statistics. John Wiley & Sons, New York, NY.

Anscombe, F.J., Aumann, R.J., 1963. A definition of subjective probability. Annals of mathematical statistics 199–205.

Segal, U., 1990. Two-Stage Lotteries without the Reduction Axiom. Econometrica 58, 349–377. https://doi.org/10.2307/2938207

Quiggin, J., 1982. A theory of anticipated utility. Journal of Economic Behavior & Organization 3, 323–343. https://doi.org/10.1016/0167-2681(82)90008-7

Tversky, A., Kahneman, D., 1992. Advances in prospect theory: Cumulative representation of uncertainty. J Risk Uncertainty 5, 297–323. https://doi.org/10.1007/BF00122574

Diecidue, E., Wakker, P.P., 2001. On the Intuition of Rank-Dependent Utility. Journal of Risk and Uncertainty 23, 281–298. https://doi.org/10.1023/A:1011877808366

Cerreia-Vioglio, S., Dillenberger, D., Ortoleva, P., 2015. Cautious Expected Utility and the Certainty Effect. Econometrica 83, 693–728. https://doi.org/10.3982/ECTA11733

Ramsey, F.P., 1931. Truth and Probability, in: Braithwaite, R.B. (Ed.), The Foundations of Mathematics and Other Logical Essays. Routledge & Kegal Paul Ltd., London, pp. 156--198. https://link.springer.com/book/10.1007/978-3-319-20451-2#page=42

De Finetti, B., 1937. La prévision: ses lois logiques, ses sources subjectives, in: Annales de l’institut Henri Poincaré. pp. 1–68.

Kyburg, H.E., Smokler, H.E., 1980. Studies in Subjective Probability. Krieger. (Contains both "Truth and Probability" by Frank Ramsey and "Foresight: Its Logical Laws, Its Subjective Sources" by Bruno de Finetti, as well as "The Bases of Probability" by Bernard Koopman.)

Ellsberg, D., 1961. Risk, Ambiguity, and the Savage Axioms*. The Quarterly Journal of Economics 75, 643–669. https://doi.org/10.2307/1884324

Machina, M.J., Schmeidler, D., 1992. A More Robust Definition of Subjective Probability. Econometrica 60, 745–780. https://doi.org/10.2307/2951565

Machina, M.J., Schmeidler, D., 1995. Bayes without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice. Journal of Economic Theory 67, 106–128. https://doi.org/10.1006/jeth.1995.1067

Anscombe, F.J., Aumann, R.J., 1963. A Definition of Subjective Probability. The Annals of Mathematical Statistics 34, 199–205.

Schmeidler, D., 1989. Subjective Probability and Expected Utility without Additivity. Econometrica 57, 571–587. https://doi.org/10.2307/1911053

Gilboa, I., Schmeidler, D., 1989. Maxmin Expected Utility with Non-Unique Prior. Journal of Mathematical Economics 18, issue 2, 141–153. https://doi.org/10.1016/0304-4068(89)90018-9

Seo, K., 2009. Ambiguity and Second-Order Belief. Econometrica 77, 1575–1605. https://doi.org/10.3982/ECTA6727

Klibanoff, P., Marinacci, M., Mukerji, S., 2005. A Smooth Model of Decision Making under Ambiguity. Econometrica 73, 1849–1892. https://doi.org/10.1111/j.1468-0262.2005.00640.x

The Theory of Incentive Compatible Experiments

Holt, C.A., Laury, S.K., 2002. Risk Aversion and Incentive Effects. American Economic Review 92, 1644–1655. https://doi.org/10.1257/000282802762024700

Karni, E., Safra, Z., 1987. “Preference Reversal” and the Observability of Preferences by Experimental Methods. Econometrica 55, 675–685. https://doi.org/10.2307/1913606

Grether, D.M., Plott, C.R., 1979. Economic Theory of Choice and the Preference Reversal Phenomenon. The American Economic Review 69, 623–638.

Harrison, G.W., Swarthout, J.T., 2014. Experimental payment protocols and the Bipolar Behaviorist. Theory Decis 77, 423–438. https://doi.org/10.1007/s11238-014-9447-y

Azrieli, Y., Chambers, C.P., Healy, P.J., 2018. Incentives in Experiments: A Theoretical Analysis. Journal of Political Economy 126, 1472–1503. https://doi.org/10.1086/698136

Azrieli, Y., Chambers, C.P., Healy, P.J., 2020. Incentives in experiments with objective lotteries. Exp Econ 23, 1–29. https://doi.org/10.1007/s10683-019-09607-0

Azrieli, Y., Chambers, C.P., Healy, P.J., 2021. Constrained preference elicitation. Theoretical Economics 16, 507–538. https://doi.org/10.3982/TE4208

Brown, A.L., Healy, P.J., 2018. Separated decisions. European Economic Review 101, 20–34. https://doi.org/10.1016/j.euroecorev.2017.09.014

Tests of Incentive Compatibility

Cox, J., Sadiraj, V., Schmidt, U., 2014a. Alternative Payoff Mechanisms for Choice Under Risk. International Advances in Economics Research 20, 239–240.

Cox, J., Sadiraj, V., Schmidt, U., 2014b. Asymmetrically Dominated Choice Problems, the Isolation Hypothesis and Random Incentive Mechanisms. PLOSone 9, e90742.

Brown, A.L., Healy, P.J., 2018. Separated decisions. European Economic Review 101, 20–34. https://doi.org/10.1016/j.euroecorev.2017.09.014

Starmer, C., Sugden, R., 1991. Does the Random-Lottery Incentive System Elicit True Preferences? An Experimental Investigation. American Economic Review 81, 971–978.

Cubitt, R.P., Starmer, C., Sugden, R., 1998. On the Validity of the Random Lottery Incentive System. Experimental Economics 1, 115–131.

Oechssler, J., Rau, H., Roomets, A., 2019. Hedging, ambiguity, and the reversal of order axiom. Games and Economic Behavior 117, 380–387.

Baillon, A., Halevy, Y., Li, C., 2022. Randomize at Your Own Risk: On the Observability of Ambiguity Aversion. Econometrica 90, 1085–1107. https://doi.org/10.3982/ECTA18137

Raiffa, H., 1961. Risk, ambiguity and the Savage axioms: Comment. Quarterly Journal of Economics 75, 690–694.

Belief Elicitation

Savage, L.J., 1971. Elicitation of Personal Probabilities and Expectations. Journal of the American Statistical Association 66, 783–801.

Ramsey, F.P., 1931. Truth and Probability, in: Braithwaite, R.B. (Ed.), The Foundations of Mathematics and Other Logical Essays. Routledge & Kegal Paul Ltd., London, pp. 156--198.

Schervish, M.J., 1989. A general method for comparing probability assessors. The Annals of Statistics 17, 1856–1879.

Gneiting, T., Raftery, A.E., 2007. Strictly Proper Scoring Rules, Prediction, and Estimation. Journal of the American Statistical Association 102, 359–378.

Testing Theories

Azrieli, Y., Chambers, C.P., Healy, P.J., 2021. Constrained preference elicitation. Theoretical Economics 16, 507–538. https://doi.org/10.3982/TE4208

Perspectives for Hypothesis Testing

Fay, M.P., Proschan, M.A., 2010. Wilcoxon-Mann-Whitney or t-test? On assumptions for hypothesis tests and multiple interpretations of decision rules. Statistics Surveys 4, 1–39.

Permutation Tests and Resampling Methods

Popular Hypothesis Tests (Castellan & Siegel's book)

Efron, B., Tibshirani, R., 1993. An Introduction to the Bootstrap. Chapman & Hall, New York.

Multiple Hypothesis Corrections

Romano, J.P., Wolf, M., 2010. Balanced control of generalized error rates. The Annals of Statistics 38, 598–633. https://doi.org/10.1214/09-AOS734

List, J.A., Shaikh, A.M., Xu, Y., 2019. Multiple hypothesis testing in experimental economics. Exp Econ 22, 773–793. https://doi.org/10.1007/s10683-018-09597-5

ECON 8877: Experimental Economics Methods