Experimental Economics

Experimental economics is a branch of applied microeconomics that utilizes controlled, scientific experiments to test economic theories and analyze economic behavior. In these experiments, researchers create carefully designed environments, either in a laboratory or in the field, where human participants make decisions that have real monetary consequences. By systematically varying conditions such as incentives, information, and market rules, economists can generate empirical data to directly observe decision-making processes, validate or challenge theoretical models, and inform the design of effective policies and market mechanisms.

  1. Introduction to Experimental Economics
    1. Defining Experimental Economics
      1. Core Characteristics
        1. Scientific Method in Economics
          1. Controlled Environment Principles
          2. Laboratory vs Field Experiments
            1. Laboratory Experiments
              1. Controlled Settings
                1. Artificial Environments
                  1. High Internal Validity
                  2. Field Experiments
                    1. Natural Settings
                      1. Real-World Context
                        1. External Validity Considerations
                      2. Experimental vs Observational Data
                        1. Causal Inference
                          1. Identification Strategies
                            1. Confounding Variables
                              1. Selection Bias Issues
                              2. Historical Development
                                1. Early Pioneers
                                  1. Edward Chamberlin
                                    1. Vernon Smith
                                    2. Market Experiments Origins
                                      1. Chamberlin's Classroom Markets
                                        1. Smith's Double Auctions
                                        2. Behavioral Economics Integration
                                          1. Psychology and Economics Merger
                                            1. Cognitive Biases Discovery
                                            2. Nobel Prize Recognition
                                              1. Vernon Smith (2002)
                                                1. Daniel Kahneman (2002)
                                                  1. Richard Thaler (2017)
                                                2. Fundamental Principles
                                                  1. Induced Value Theory
                                                    1. Monetary Incentives
                                                      1. Preference Control
                                                        1. Value Induction Methods
                                                        2. Non-Satiation Assumption
                                                          1. More Money Preferred
                                                            1. Incentive Effectiveness
                                                            2. Salience Principle
                                                              1. Relevant Rewards
                                                                1. Decision Consequences
                                                                2. Dominance Condition
                                                                  1. Experimental Payoffs
                                                                    1. Alternative Opportunity Costs
                                                                    2. Privacy Protection
                                                                      1. Anonymous Decisions
                                                                        1. Social Pressure Elimination
                                                                      2. Research Objectives
                                                                        1. Theory Testing
                                                                          1. Hypothesis Evaluation
                                                                            1. Model Validation
                                                                              1. Falsification Attempts
                                                                              2. Empirical Regularities
                                                                                1. Behavioral Patterns
                                                                                  1. Stylized Facts
                                                                                    1. Anomaly Documentation
                                                                                    2. Policy Applications
                                                                                      1. Mechanism Design
                                                                                        1. Institutional Evaluation
                                                                                          1. Regulatory Insights