1. Introduction and overview. A brief history of experimental economics
A sample design for a market experiment
Experimental methods: advantages and limitations
Types of experiments
Some procedural and design considerations
Laboratory trading institutions. Appendices: Oral-double auction instructions; Suggestions for conducting and oral-double auction. 2. Decisions and games. Lotteries and expected values
A sequential search experiment
Expected-utility maximization and risk aversion
Game theory, natural form games
Extensive forms and backward-induction rationality
Decision theory, game theory, and price theory
Appendices: Derivation of the reservation wage; Instructions for a sequential search experiment; Constructing a von Neumann-Morgenstern utility function; Sequential equilibria; Instructions for the centepede game.
3. Double-auction markets. Double-auction procedures and performance
Computers and the double auction
Double-auction results: design effects; structural boundaries
Multiple, interrelated double-auction markets
Double-auction asses markets. 4. Posted-offer markets. Posted-offer procedures and performance
Posted offer results: design effects
Factors that generate supracompetitive prices
Market power
Regulation and restraint of monopoly power
Appendices: Instructions for a posted-offer auction; Posted-offer instruction for computer implementation; Calculation of a mixed-strategy equilibrium. 5. Bargaining and auctions. Unstructured bargaining without side payments
Bargaining over an externality: the Coase theorem
Structured bargaining: Ultimatum game experiments; Alternating order experiments
Auctions with fixed supply
First-price auctions with private values
Common-value auctions and the winner's curse
Design of new auction institutions
Appendices: Equilibrium bidding strategies; Instructions for a bargaining game with asymmetrics; Derivation of the optimal bid in an ultimatum game with value and information asymmetries. 6. Public goods, externalities, and voting. The voluntary-contribution mechanism
Results
Factors that may alleviate free-riding
Incentive-compatible mechanisms
Externalities
Voting
Appendices: A public-goods problem with private information; Instructions, the voluntary contributions mechanism; Incentive-compatibility in the Groves-Ledyard mechanism. 7. Asymmetric information. Quality uncertainty and "lemons" market outcomes
Reputation effects
Signaling
Informational asymmetries in asset markets
State uncertainty and insider information
The Iowa presidential stock market
Appendix: A market experiment with information asymmetrics.
8. Individual decisions in risky situations. Probability-triangle representations
Lottery-choice experiments
Financial incentives and controls for wealth effects
Preference elicitation: problems and applications
Preference reversals
Inducing risk preferences
Information processing: Baye's rules and biases
Appendices: Instructions for lottery experiments; Scoring-rule probability; Utility elicitation. 9. Economic behavior and experimental methods: summary and extensions. Major results of experiments to date
The relationship among theoretical, experimental, and natural eeconomic environments
Experimental design
Statistical analysis of data from economics experiments
Statistical tests: Single treatment designs; Designs involving two or more treatments
Conclusion: toward a more experimental science.
A sample design for a market experiment
Experimental methods: advantages and limitations
Types of experiments
Some procedural and design considerations
Laboratory trading institutions. Appendices: Oral-double auction instructions; Suggestions for conducting and oral-double auction. 2. Decisions and games. Lotteries and expected values
A sequential search experiment
Expected-utility maximization and risk aversion
Game theory, natural form games
Extensive forms and backward-induction rationality
Decision theory, game theory, and price theory
Appendices: Derivation of the reservation wage; Instructions for a sequential search experiment; Constructing a von Neumann-Morgenstern utility function; Sequential equilibria; Instructions for the centepede game.
3. Double-auction markets. Double-auction procedures and performance
Computers and the double auction
Double-auction results: design effects; structural boundaries
Multiple, interrelated double-auction markets
Double-auction asses markets. 4. Posted-offer markets. Posted-offer procedures and performance
Posted offer results: design effects
Factors that generate supracompetitive prices
Market power
Regulation and restraint of monopoly power
Appendices: Instructions for a posted-offer auction; Posted-offer instruction for computer implementation; Calculation of a mixed-strategy equilibrium. 5. Bargaining and auctions. Unstructured bargaining without side payments
Bargaining over an externality: the Coase theorem
Structured bargaining: Ultimatum game experiments; Alternating order experiments
Auctions with fixed supply
First-price auctions with private values
Common-value auctions and the winner's curse
Design of new auction institutions
Appendices: Equilibrium bidding strategies; Instructions for a bargaining game with asymmetrics; Derivation of the optimal bid in an ultimatum game with value and information asymmetries. 6. Public goods, externalities, and voting. The voluntary-contribution mechanism
Results
Factors that may alleviate free-riding
Incentive-compatible mechanisms
Externalities
Voting
Appendices: A public-goods problem with private information; Instructions, the voluntary contributions mechanism; Incentive-compatibility in the Groves-Ledyard mechanism. 7. Asymmetric information. Quality uncertainty and "lemons" market outcomes
Reputation effects
Signaling
Informational asymmetries in asset markets
State uncertainty and insider information
The Iowa presidential stock market
Appendix: A market experiment with information asymmetrics.
8. Individual decisions in risky situations. Probability-triangle representations
Lottery-choice experiments
Financial incentives and controls for wealth effects
Preference elicitation: problems and applications
Preference reversals
Inducing risk preferences
Information processing: Baye's rules and biases
Appendices: Instructions for lottery experiments; Scoring-rule probability; Utility elicitation. 9. Economic behavior and experimental methods: summary and extensions. Major results of experiments to date
The relationship among theoretical, experimental, and natural eeconomic environments
Experimental design
Statistical analysis of data from economics experiments
Statistical tests: Single treatment designs; Designs involving two or more treatments
Conclusion: toward a more experimental science.