Experimental Economics

Nicholas Bardsley is senior research fellow at the National Centre for Research Methods, University of Southampton. Robin Cubitt is professor of economics and decision research at the University of Nottingham. Graham Loomes is professor of economic behavior and decision theory at the University of East Anglia. Peter Moffatt is reader in econometrics at the University of East Anglia. Chris Starmer is professor of experimental economics at the University of Nottingham. Robert Sugden is professor of economics at the University of East Anglia.

• Preface vii Chapter 1: Introduction 1 1.1 Experiments in Economics 1 1.2 Does Economics Need Experiments? 4 1.3 The Practice of Experimental Economics 11 1.4 The Illustrations and the Structure of the Book 23 1.5 Methods, Methodology, and Philosophy of Science 36 Chapter 2: Theory Testing and the Domain of Economic Theory 46 2.1 Domain Restrictions: Economic Theory and the Laboratory 46 2.2 Generality and External Validity 49 2.3 The Blame-the-Theory Argument 54 2.4 The Concept of Domain 56 2.5 The Laboratory and the Three Senses of Domain 64 2.6 Application to Experimental Tests of Choice Theory 71 2.7 Application to Experimental Tests of Equilibrium Predictions 85 2.8 Conclusions 92 Chapter 3: Experimental Testing in Practice 95 3.1 Preliminaries 95 3.2 Experimental Testing and the Duhem-Quine Thesis 95 3.3 On the Significance of the DQT for Testing 106 3.4 On Testing Game Theory 114 3.5 Hard Cores, Progress, and Experiments 128 3.6 Conclusion 138 Chapter 4: Experiments and Inductive Generalization 141 4.1 Preliminaries 141 4.2 Deduction versus Induction 142 4.3 How Inductive Investigation Works 145 4.4 Experiments as Tests 150 4.5 Exhibits 156 4.6 Why Be Interested in Exhibits? 160 4.7 Do Exhibits Need to Be Explained? 166 4.8 Multiple Causation 169 4.9 Explaining Exhibits Inductively 172 4.10 Investigating Exhibits without Trying to Explain Them 184 4.11 Experiments as Models 189 4.12 Conclusion 194 Chapter 5: External Validity 196 5.1 Introduction 196 5.2 Are Economics Experiments Models? 197 5.3 Tests of Applied Economics Theories 204 5.4 Types of Artificiality Criticism 214 5.5 Alteration Contrasted with Omission and Contamination 228 5.6 Evaluating Alteration Criticisms 233 5.7 Field Experiments 237 5.8 Conclusions 242 Chapter 6: Incentives in Experiments 244 6.1 Preliminaries 244 6.2 Incentives, Design, and Control 246 6.3 Incentives in Experimental Economics: Convention in Action 248 6.4 Three Perspectives on the Effect of Incentives on Behavior 250 6.5 Incentive Mechanisms 264 6.6 Conclusion 284 Chapter 7: Noise and Variability in Experimental Data 286 7.1 "Noise" in Economics and in Experimental Economics 286 7.2 "Noise" in Individual Decision Experiments 289 7.3 "Noise" in Experimental Games 306 7.4 Exploring Different Stochastic Specifications 322 7.5 Concluding Remarks 329 Chapter 8: Conclusion 331 8.1 How Successful Has Experimental Economics Been in Developing a Sound Methodology? 332 8.2 How Successful Has Experimental Economics Been in Increasing Understanding of Economic Behavior? 338 8.3 Has Experimental Economics Had a Positive Impact on Wider Economics? 342 References 347 Index 369

"Experimental Economics is a well intentioned book which does an admirable job in consolidating and modernising the ongoing methodological debates surrounding experimental economics... I would recommend this book to empirical social scientists, particularly the first two parts, which crystallise the major debates ongoing in the discipline."--Tom Wilkening, The Economic Record "This is an extremely rich and cultured book that makes a large number of intelligent points about experimental methods. It also raises sophisticated questions concerning what it means to test a theory and how one can test in an environment in which an error model unconstrained by theory is essential to judging empirical fit."--Andrew Caplin, Journal of Economics and Philosophy