ECON 8877: Experimental Economics Methods

Fall 2023

Mondays & Wednesdays, 4:00–5:20 p.m. // Arps 318

Professor: P.J. Healy

What's the right way to run an economics experiment?

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

Topics Covered

Papers listed here may not be assigned, but you may find them relevant.

Vernon Smith's Precepts

Lecture Slides

Recommended Papers:
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

Lecture Slides

Recommended Papers:
Roth, A.E., 2020. Introduction to Experimental Economics, in: The Handbook of Experimental Economics. Princeton University Press, pp. 1–110.
Thurstone, L.L., 1931. The Indifference Function. The Journal of Social Psychology 2, 139–167.
Rousseas, S.W., Hart, A.G., 1951. Experimental Verification of a Composite Indifference Map. Journal of Political Economy 59, 288–318.
Mosteller, F., Nogee, P., 1951. An Experimental Measurement of Utility. Journal of Political Economy 59, 371–404.
De Herdt, T., 2003. Cooperation and fairness: the flood–Dresher experiment revisited. Review of Social Economy 61, 183–210.
Schelling, T.C., 1957. Bargaining, communication, and limited war. Conflict Resolution 1, 19–36.
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.
Chamberlin, E.H., 1948. An Experimental Imperfect Market. Journal of Political Economy 56, 95–108.
Smith, V.L., 1962. An Experimental Study of Competitive Market Behavior. Journal of Political Economy 70, 111–137.
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.
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.
Isaac, R.M., McCue, K.F., Plott, C.R., 1985. Public goods provision in an experimental environment. Journal of Public Economics 26, 51–74.
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.

Decision Theory: A Primer

Lecture Slides

Recommended Papers:
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.
Quiggin, J., 1982. A theory of anticipated utility. Journal of Economic Behavior & Organization 3, 323–343.
Tversky, A., Kahneman, D., 1992. Advances in prospect theory: Cumulative representation of uncertainty. J Risk Uncertainty 5, 297–323.
Diecidue, E., Wakker, P.P., 2001. On the Intuition of Rank-Dependent Utility. Journal of Risk and Uncertainty 23, 281–298.
Cerreia-Vioglio, S., Dillenberger, D., Ortoleva, P., 2015. Cautious Expected Utility and the Certainty Effect. Econometrica 83, 693–728.
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.
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.
Machina, M.J., Schmeidler, D., 1992. A More Robust Definition of Subjective Probability. Econometrica 60, 745–780.
Machina, M.J., Schmeidler, D., 1995. Bayes without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice. Journal of Economic Theory 67, 106–128.
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.
Gilboa, I., Schmeidler, D., 1989. Maxmin Expected Utility with Non-Unique Prior. Journal of Mathematical Economics 18, issue 2, 141–153.
Seo, K., 2009. Ambiguity and Second-Order Belief. Econometrica 77, 1575–1605.
Klibanoff, P., Marinacci, M., Mukerji, S., 2005. A Smooth Model of Decision Making under Ambiguity. Econometrica 73, 1849–1892.

The Theory of Incentive Compatible Experiments

Lecture Slides

Recommended Papers:
Holt, C.A., Laury, S.K., 2002. Risk Aversion and Incentive Effects. American Economic Review 92, 1644–1655.
Karni, E., Safra, Z., 1987. “Preference Reversal” and the Observability of Preferences by Experimental Methods. Econometrica 55, 675–685.
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.
Azrieli, Y., Chambers, C.P., Healy, P.J., 2018. Incentives in Experiments: A Theoretical Analysis. Journal of Political Economy 126, 1472–1503.
Azrieli, Y., Chambers, C.P., Healy, P.J., 2020. Incentives in experiments with objective lotteries. Exp Econ 23, 1–29.
Azrieli, Y., Chambers, C.P., Healy, P.J., 2021. Constrained preference elicitation. Theoretical Economics 16, 507–538.
Brown, A.L., Healy, P.J., 2018. Separated decisions. European Economic Review 101, 20–34.