Experimental economics / Douglas D. Davis, Charles A. Holt.

Format:

Book

Author/Creator:

Davis, Douglas D., 1957- author.

Holt, Charles A., 1948- author.

Language:

English

Subjects (All):

Experimental economics.

Physical Description:

1 online resource (588 pages)

Place of Publication:

Princeton, New Jersey : Princeton University Press, [1993]

Summary:

A small but increasing number of economists have begun to use laboratory experiments to evaluate economic propositions under carefully controlled conditions. Experimental Economics is the first comprehensive treatment of this rapidly growing area of research. While the book acknowledges that laboratory experiments are no panacea, it argues cogently for their effectiveness in selected situations. Covering methodological and procedural issues as well as theory, Experimental Economics is not only a textbook but also a useful introduction to laboratory methods for professional economists.Although the authors present some new material, their emphasis is on organizing and evaluating existing results. The book can be used as an anchoring device for a course at either the graduate or advanced undergraduate level. Applications include financial market experiments, oligopoly price competition, auctions, bargaining, provision of public goods, experimental games, and decision making under uncertainty. The book also contains instructions for a variety of laboratory experiments.

Contents:

Cover Page

Half-title Page

Title Page

Copyright Page

Contents

Preface

Acknowledgments

1. Introduction and Overview

1.1 Introduction

1.2 A Brief History of Experimental Economics

1.3 A Simple Design for a Market Experiment

1.4 Experimental Methods: Advantages and Limitations

1.5 Types of Experiments

1.6 Some Procedural and Design Considerations

1.7 Laboratory Trading Institutions

1.8 Conclusion and Overview

Appendix Al

A1.1 Oral-Double Auction Instructions

A1.2 Suggestions for Conducting an Oral Double Auction

References

2. Decisions and Games

2.1 Introduction

2.2 Lotteries and Expected Values

2.3 A Sequential Search Experiment

2.4 Expected-Utility Maximization and Risk Aversion

2.5 Game Theory: Normal-Form Games

2.6 Extensive Forms and Backward-Induction Rationality

2.7 Decision Theory, Game Theory, and Price Theory

Appendix A2

A2.1 Derivation of the Reservation Wage

A2.2 Instructions for a Sequential Search Experiment

A2.3 Constructing a von Neumann-Morgenstern Utility Function

A2.4 Sequential Equilibria

A2.5 Instructions for the Centipede Game

3. Double-Auction Markets

3.1 Introduction

3.2 Double-Auction Procedures and Performance

3.3 Computers and the Double Auction

3.4 Double-Auction Results: Design Effects

3.5 Double-Auction Results: Structural Boundaries

3.6 Multiple, Interrelated Double-Auction Markets

3.7 Double-Auction Asset Markets

3.8 Conclusion

4. Posted-Offer Markets

4.1 Introduction

4.2 Posted-Offer Procedures and Performance

4.3 Posted-Offer Results: Design Effects

4.4 Factors That Generate Supracompetitive Prices

4.5 Market Power

4.6 Regulation and Restraint of Monopoly Power

4.7 Conclusions

Appendix A4

A4.1 Instructions for a Posted-Offer Auction.

A4.2 Posted-Offer Instructions for Computer Implementation

A4.3 Calculation of a Mixed-Strategy Equilibrium

5. Bargaining and Auctions

5.1 Introduction

5.2 Unstructured Bargaining without Side Payments

5.3 Bargaining Over an Externality: The Coase Theorem

5.4 Structured Bargaining: Ultimatum Game Experiments

5.5 Structured Bargaining: Alternating-Giia' Experiments

5.6 Auctions with Fixed Supply

5.7 First-Price Auctions with Private Values

5.8 Common-Value Auctions and the Winner's Curse

5.9 Design of New Auction Institutions

5.10 Conclusions

Appendix A5

A5.1 Equilibrium Bidding Strategies

A5.2 Instructions for a Bargaining Game with Asymmetries

A5.3 Derivation of the Optimal Bid in an Ultimatum Game with Value and Information Asymmetries

6. Public Goods, Externalities, and Voting

6.1 Introduction

6.2 The Voluntary-Contributions Mechanism

6.3 The Voluntary-Contributions Mechanism: Results

6.4 Factors That May Alleviate Free-Riding

6.5 Incentive-Compatible Mechanisms

6.6 Externalities

6.7 Voting

6.8 Summary

Appendix A6

A6.1 A Public-Goods Problem with Private Information

A6.2 Instructions: The Voluntary Contributions Mechanism

A6.3 Incentive Compatibility in the Groves-Ledyard Mechanism

7. Asymmetric Information

7.1 Introduction

7.2 Quality Uncertainty and "Lemons" Market Outcomes

7.3 Reputation Effects

7.4 Signaling

7.5 Informational Asymmetries in Asset Markets

7.6 State Uncertainty and Insider Information

7.7 The Iowa Presidential Stock Market

7.8 Conclusion

Appendix A7

A7.1 Instructions: a Market Experiment with Information Asymmetries

8. Individual Decisions in Risky Situations

8.1 Introduction

8.2 Probability-Triangle Representations.

8.3 Lottery-Choice Experiments

8.4 Financial Incentives and Controls for Wealth Effects

8.5 Preference Elicitation: Problems and Applications

8.6 Preference Reversals

8.7 Inducing Risk Preferences

8.8 Information Processing: Bayes' Rule and Biases

8.9 Summary

Appendix A8

A8.1 Instructions for Lottery Experiments

A8.2 Instructions for Scoring-Rule Probability Elicitation

A8.3 Utility Elicitation

9. Economic Behavior and Experimental Methods: Summary and Extensions

9.1 Introduction

9.2 Major Results of Experiments to Date

9.3 The Relationship among Theoretical, Experimental, and Natural Economic Environments

9.4 Experimental Design

9.5 Statistical Analysis of Data From Economics Experiments

9.6 Statistical Tests: Single-Treatment Designs

9.7 Statistical Tests: Designs Involving Two or More Treatments

9.8 Conclusion: Toward a More Experimental Science

Index.

Notes:

Includes bibliographical references and index.

Description based on print version record.

ISBN:

9780691043173

0691043175

OCLC:

44203330