Handbook of Experimental Economics Results

Edited by

  • Charles Plott, California Institute of Technology, Pasadena, USA
  • Vernon Smith, George Mason University, Fairfax, VA, USA

Experimental methods in economics respond to circumstances that are not completely dictated by accepted theory or outstanding problems. While the field of economics makes sharp distinctions and produces precise theory, the work of experimental economics sometimes appear blurred and may produce results that vary from strong support to little or partial support of the relevant theory. At a recent conference, a question was asked about where experimental methods might be more useful than field methods. Although many cannot be answered by experimental methods, there are questions that can only be answered by experiments. Much of the progress of experimental methods involves the posing of old or new questions in a way that experimental methods can be applied. The title of the book reflects the spirit of adventure that experimentalists share and focuses on experiments in general rather than forcing an organization into traditional categories that do not fit. The emphasis reflects the fact that the results do not necessarily demonstrate a consistent theme, but instead reflect bits and pieces of progress as opportunities to pose questions become recognized. This book is a result of an invitation sent from the editors to a broad range of experimenters asking them to write brief notes describing specific experimental results. The challenge was to produce pictures and tables that were self-contained so the reader could understand quickly the essential nature of the experiments and the results.
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Book information

  • Published: August 2008
  • Imprint: NORTH-HOLLAND
  • ISBN: 978-0-444-82642-8


"For anyone interested in experimental economics this is a book that one should have on one’s shelf.  Plott and Smith have assembled a collection of papers that illustrate the power of experimental methods for understanding the appropriate role of markets and other institutions for dealing with real-world problems. "

--Howard Kunreuther, Wharton School, University of Pennsylvania


"Plott and Smith have provided an incisive and instructive summary of the results and methods of experimental economics, and a comprehensive handbook of experimental methods and findings from applied mechanism design to the study of behavior and interaction of economic agents.

This handbook is an outstanding introduction to the experimental methods that are transforming economics, and an essential addition to the bookshelf of every economist interested in understanding and participating in this emerging field."

--Daniel L. McFadden, University of California, Berkeley

Table of Contents

INTRODUCTION1. MARKETS1.1 INSTITUTIONAL ENVIRONMENTS1.1.1 Properties of the double auctionCharles R. Plott. "Properties of Disequilibrium Adjustment in Double Auction Markets"Peter Bossaerts and Charles R. Plott, "From Market Jaws to the Newton Method: The Geometry of How A Market Can Solve Systems of Equations"Vernon L. Smith and Mark Van Boening, "Exogenous Uncertainty Increases the Bid-Ask Spread in the Continuous Double Auction"Paul J. Brewer, "Zero Intelligent Robots and the Double Auction Market: A Graphical Tour"Vernon Smith and Arlington Williams, "Effect of Non-binding Price Controls in Double Auction Trading"1.1.2 Properties of posted offer processesPraveen Kujal and Vernon L. Smith, "Fairness and Short Run Price Adjustments in Posted Offer Markets"D.Davis and Bart J. Wilson, "Mixed Strategy Nash Equilibrium Predictions as a Means of Organizing Behavior in Posted-Offer Market Experiments"J.B. Kruse, "Simulated and Real Buyers in Posted Offer Markets"Stuart Mestelman, "The Performance of Double-Auction and Posted-Offer Markets with Advanced Production"1.1.3 Call markets and sealed bidsVernon L. Smith, "Strategy-Proof Equilibrium Behavior in Two-Sided Auctions" James C. Cox, "First Price Independent Private Values Auctions" 1.1.4 Alternative market institutionsCorinne Bronfman, Kevin McCabe, David Porter, Stephen Rassenti and Vernon L. Smith, "The Walrasian Auction"Dan Friedman and Changhua Rich, "The Matching Market Institution"Charles R. Plott, "Tatonnement"1.2 IMPERFECT COMPETITION1.2.1 Market PowerE. Fehr and S. Gachter, "Wage Differentials in Experimental Efficiency Wage Markets"Yvonne Durham, Jack Hirshleifer and V.L. Smith, "The Paradox of Power"D.Davis and C. Holt, "The Exercise of Market Power in Laboratory Experiments"Antoni Bosch-Domènech and Nicolaas J. Vriend, "The Classical Experiments on Cournot Oligopoly"James C. Cox and R. Mark Isaac, "Experiments in Decentralized Monopoly Restraint" 1.2.2 CollusionT. Cason, "Price Signaling and "Cheap Talk" in Laboratory Posted Offer Markets" D.Davis and C. Holt, "The Effects of Collusion in Laboratory Experiments"Rosario Gomex, Jacog K. Goeree and Charles Holt, "Preditory Pricing: Rare Like a Unicorn?"Katerina Sherstyuk, "Some Results on Anti-competitive Behavior in Multi-unit Ascending Price Auctions"1.2.3 Non-convexitiesCharles R. Plott, "Non Convexities, Economies of Scale, Natural Monopoly and Monopolistic Competition"Mark V. Van Boening and Nathaniel T. Wilcox, "Avoidable Cost Structures and Competitive Market Institutions"1.3 DYNAMICS OF MARKET ADJUSTMENTSCharles R. Plott, "Principles of Adjustment and Stability"Vernon L. Smith and Mark Van Boening, "Off-Floor Trading, Market Disintegration and Price Volatility in Bid/Ask Markets"Praveen Kujal, "Quantitative Restrictions in Experimental Posted-Offer Markets"A.W. Williams, "Price Bubbles in Large Financial Asset Markets"David Porter and Vernon L. Smith, "Price Bubbles"Eric Fisher, "Experiments with Arbitrage Across Assets"Charles Noussair and Plott, "Bubbles and Crashes in Experimental Asset Markets: Common Knowledge Failure?"T. Cason and D. Friedman, "A Comparison of Market Institutions"A. Rapoport, D. Seale, "Coordination Success in Noncooperative Large Group Market Entry Games"2. MARKET ECONOMICS OF UNCERTAINTY AND INFORMATIONH. Kelley and D. Friedman, "Learning to Forecast Rationally"James C. Cox and Ronald L. Oaxaca, "Laboratory Tests of Job Search Models"S. Gachter and E. Fehr, "Reciprocity and Contract Enforcement"E. Fehr and A. Falk, "Reciprocity in Experimental Markets"Lisa R. Anderson and Charles A. Holt "Information Cascade in Experiments"Kay-Yut Chen and Charles R. Plott, "Markets and Information Aggregation Mechanisms "3. GENERAL EQUILIBRIUM AND THE ECONOMICS OF MULTIPLE MARKET SYSTEMS Charles R. Plott, "Comparative Advantage and International Trade"Peter Bossaerts, "Asset Pricing"Charles R. Plott, and Jackie Yeung, "Price Discovery and Allocation in Chains and Networks of Markets" Charles R. Plott, "Multiple Market Systems and the Classical Principles of Price Dynamics in General Equilibrium"4. GAMES4.1 ACCURACY OF THE NASH MODELRosemarie Nagel, "Experimental Beauty Contest-Games: Levels of Reasoning and Convergence to Equilibrium"Elizabeth Hoffman, Kevin McCabe and Vernon Smith, "Reciprocity in Ultimatum and Dictator Games: An Introduction" Elizabeth Hoffman, Kevin, McCabe and Vernon Smith, "Preferences and Property Rights in Ultimatum and Dictator Games"E. Hoffman, K. McCabe and Vernon Smith, "Prompting Strategic Reasoning Increases Other-Regarding Behavior"Elizabeth Hoffman, Kevin McCabe and Vernon Smith, "Social Distance And Reciprocity In Dictator Games"Keith Murnighan, "Fairness in Ultimatum Bargaining"John Van Huyck, "Coordination Failure in Market Statistic Game"Carl M. Rhodes and Rick K. Wilson, "The Problem of Common Choice in Symmetric N-person Coordination Games"Nicole Bouchez and D. Friedman, "Equilibrium Convergence in Normal Form Games" J.Andreoni and J.Miller, "Analyzing Choice with Revealed Preference: Is Altruism Rational?"Gary E. Bolton, Jordi Brandts, Elena Katok, Axel Ockenfels and Rami Zwick, "Testing Theories of Other-Regarding Behavior: A Sequence of Four Laboratory Studies" Ken Binmore and Joseph Swierzbinski. "Focal Points and Barganing"4.2 ALTERNATIVES TO NASHC. Eckel and P. Grossman, "The Difference in the Economic Decisions of Men and Women: Experimental Evidence"John Van Huyck, "Emergent Conventions in Evolutionary Games" Gary E. Bolton and Axel Ockenfels, "Self-Centered Fairness in Games With More Than Two Players" R. McKelvey and Thomas Palfrey, "Quantal Response Equilibria: A Brief Synopsis" Simon P. Anderson, Jacob K. Goeree, and Charles A. Holt, "Logit Equilibrium Models of Anomalous Behavior: What to do when the Nash Equilibrium Says One Thing and the Data Say Something Else"4.3 LEARNING IN GAMESA. Rapoport, T. Daniel, D.Seale, "Asymmetric Two-Person Bargaining Under Incomplete Information: Strategic Play and Adaptive Learning"A. Blume, D. DeJong and G. Sprinkle, "The Effect of Message Space Size on Learning and Outcomes in Sender-Receiver Games"David J. Cooper, "Learning in Entry Limit Pricing Games", Lawrence M. Kahn and J. Keith Murnighan, "Payoff Uncertainty and Cooperation in Finitely-Repeated Prisoner’s Dilemma Games"Colin Camerer and Teck-Hua Ho. "Learning in Games"5. MECHANISM DESIGN AND POLICY APPLICATIONS5.1 ABSTRACT, THEORY DRIVENYan Chen,"Incentive-Compatible Mechanisms for Pure Public Goods: A Survey of Experimental Research"Stephen J. Rassenti and Vernon L. Smith, "The Combinatorial Auction"5.2 APPLIED, PROBLEM DRIVENStuart Mestelman and R.A. Muller, "Share Trading and Coupon Banking Interact to Improve Performance in Emission Trading Markets"T. Cason, "Trading Institutions and Emission Allowances"James C. Cox and Mark Isaac, "Procurement Contracting" Stephen Rassenti and Vernon L. Smith, "Electric Power Market Design Issues and Laboratory Experiments"Mark A. Olson, Stephen Rassenti and Vernon L. Smith, "Energy Reserve and Adjustment Market Behavior with Industry Network, Demand and Generator Partners"Steven B Ackerman, Stephen Rassenti and Vernon L. Smith, "Transmission Constraints, Incentive Auction Rules and Trader Experience in Electric Power Market"Hung-Po Chao and Charles R. Plott, "A Smart Market for the Spot Pricing and Pricing of Transmission Through a Power Grid"5.3 FROM THE LAB TO THE FIELDColin Camerer, "Asset Market Manipulation: A Field Experiment with Racetrack Betting"Peter Bohm, "Pre-testing International Climate Change Policies: Methods and Results" Peter Bohm, "Quasi-experimental Evaluaion of Regional Employment Subsidies"Peter Bohm, "Field-test Elicitation of Demand for Public Goods"Joyce Berg, Robert Forsythe, Forrest Nelson and Thomas Rietz, "Results from a Dozen Years of Election Futures Market Research" Glen W. Harrison and E. Elisabet Rutstrom, "Experimental Evidence on the Existence of Hypothetical Bias in Value Elicitation Methods" 6. NON MARKET AND ORGANIZATIONAL RESEARCH6.1 PUBLIC GOODS, EXTERNALITIES AND COMMON POOLSJ. Andreoni and R. Croson, "Partners versus Strangers: Random Rematching in Public Goods Experiments"Rachel T.A. Croson, "Differentiating Altruism and Reciprocity"Susan Laury and Charles Holt, "Voluntary Provision of Public Goods: Experimental Results with Interior Nash Equilibria"Tatsuyoshi Saijo, "Spiteful Behavior in Voluntary Contribution Mechanism Experiments"A. Schram, T. Offerman and J. Sonnemans, "Explaining the comparative statics in step-level public goods games"J. Brandts and A.Schram, "Cooperation in VCM Experiments: Results Using the Contribution Function Approach"Kenneth Chan, Stuart Mestelman and R. Andrew Muller, "Voluntary Provision of Public Goods"Frans van Winden, Frans van Dijk and Joep Sonneman, "Intrinsic Motivation in a Public Good Environment"Charles A. Holt and Susan K. Laury, "Theoretical Explanations of Treatment Effects in Voluntary Contributions Experiments"6.2 COMMITTEES AND VOTING GROUPSW. Bottom, C. Eavey, L.Handlin, R. King and G. Miller, "Institutional Modifications of Majority Rule"Rick K. Wilson, "Endogeneous Properties of Equilibrium and Disequilibrium in Spatial Committee Games"Rick K. Wilson, "Structure Induced Equilibrium in Spatial Committee Games"Thomas Rietz, "Three-way Experimental Election Results: Strategic Voting, Coordinated Outcomes and Duverger's Law"J. Sonnemans and A. Schram, "Participation Game Experiments: Explaining Voter Turnout"6.3 BEHAVIOR AND ORGANIZATIONSColin F. Camerer and Roberto Weber, "Growing organizational culture in the laboratory"7. INDIVIDUAL CHOICE, BELIEFS AND BEHAVIORVernon L. Smith and James M. Walker, "Motivation Theory and Experimental Behavior Under the Decision Cost Hypothesis"E. Fehr and P. Zych, "Intertemporal Choice under Habit Formation"Peter Bohm, "Preference Reversal: Now You See It, Now You Don’t!"Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, "The Endowment Effect: Evidence of Losses Valued More than Gains"Praveen Kujal and Vernon L. Smith, "The Endowment Effect"Peter Bohm, "The Becker-Degroot-Marschak Mechanism is Not Generally Incentive Compatible in Practice"James C. Cox, "Utility Maximization" James C. Cox, "Preference Reversals" Gerd Gigerenzer and Peter M. Todd, "Bounded Rationality the Fast and Frugal Way: Introduction" Daniel G. Goldstein and Gerd Gigerenzer, "The Recognition Heuristic and The Less-Is-More Effect"Bernhard Borges, Daniel G. Goldstein, Andreas Ortmann, and Gerd Gigerenzer, "The Recognition Heuristic: A Fast And Frugal Way To Investment Choice?" Gerd Gigerenzer, Laura Martignon, Ulrich Hoffrage, Jörg Rieskamp, Jean Czerlinski and Daniel G. Goldstein, "One-Reason Decision Making" Gerd Gigerenzer, Ralph Hertwig, Ulrich Hoffrage, and Peter Sedlmeier, "Cognitive Illusions Reconsidered" Peter M. Todd and Gerd Gigerenzer, "Social Heuristics" Susan K. Laury and Charles A. Holt, "Payoff Scale Effects and Risk Preference Under Real and Hypothetical Conditions"Vernon L. Smith and James M. Walker, "Rewards and Behavior in First Price Auctions" Catherine C. Eckel and Philip J. Grossman, "Sex and Risk: Experimental Evidence"8. METHODSJames C. Cox and Ronald L. Oaxaca, "Experimetrics: The Use of Market Experiments to Evaluate the Performance of Econometric Estimators" Joyce E. Berg, Jhon W.Dickhaut and Thomas A.Rietz, "On the Performance of the Lottery Procedure for Controlling Risk Perferences"