Since the 1980s, there has been explosive growth in the use of experimental methods in economics, leading to exciting developments in economic theory and policy. Despite this, the status of experimental economics remains controversial. InExperimental Economics, the authors draw on their experience and expertise in experimental economics, economic theory, the methodology of economics, philosophy of science, and the econometrics of experimental data to offer a balanced and integrated look at the nature and reliability of claims based on experimental research.
The authors explore the history of experiments in economics, provide examples of different types of experiments, and show that the growing use of experimental methods is transforming economics into a genuinely empirical science. They explain that progress is being held back by an uncritical acceptance of folk wisdom regarding how experiments should be conducted, a failure to acknowledge that different objectives call for different approaches to experimental design, and a misplaced assumption that principles of good practice in theoretical modeling can be transferred directly to experimental design.Experimental Economics debates how such limitations might be overcome, and will interest practicing experimental economists, nonexperimental economists wanting to interpret experimental research, and philosophers of science concerned with the status of knowledge claims in economics.
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"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
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The authors of this book have pulled off a remarkable feat: a page-turner on experimental economics that will appeal to a wide audience. Noneconomists and nonexperimentalists will be treated to a fascinating introduction to the methods, philosophy, and controversy of this rapidly expanding area of research. Experimental economists will get a whole new perspective on their field that will make them think differently about their own work. Not to be missed! -- George Loewenstein, Carnegie Mellon University Experimental Economics fills an important gap in the literature. It provides a thoughtful and rigorous treatment of key methodological and conceptual issues that are frequently discussed informally by experimental economists but are rarely addressed explicitly. I would recommend it for students and current practitioners of experiments, as well as experienced economists who would like to learn more about how experiments are useful in advancing economic science. -- Timothy Cason, Purdue University Economists increasingly run experiments. How do they justify and motivate their work? Are their methods sound? Read this book and you will be wiser. -- Martin Dufwenberg, University of Arizona This interesting book deals with important methodological issues involved in running and evaluating experiments in economics. The authors employ numerous well-known experiments to discuss a variety of practical and philosophy of science issues as they relate to experimental economics--and the broader social science literature as well. This book will be of value to practicing social science experimenters, skeptics of experimental methods in the social sciences, and general interest readers. -- John H. Kagel, coeditor of "The Handbook of Experimental Economics" With an extremely clear presentation as well as sharp and rigorous arguments, this book will become a standard introduction to the methodological foundations of experimental economics. The authors have the rare gift of effectively combining philosophical analysis with economic science, while satisfying the highest standards of scholarship in both fields. -- Francesco Guala, University of Exeter Assessing experimental economics is an important and innovative endeavor--the authors succeed in providing a systematic and broad view of the discipline. Extremely clear and accessible, this book is full of deep methodological reflections. I gained many new perspectives and insights, and profited greatly from reading this book. -- Bettina Rockenbach, University of Erfurt This book is a great enrichment to the experimental economic field and bridges the gap between the methodology of philosophy of science and experimental economics. Raising many excellent issues in depth, the book examines the contributions of experimental economics to economic theory, and discusses controversies between theorists and experimentalists. -- Rosemarie Nagel, Pompeu Fabra University, Barcelona This book is important in view of the controversial nature of experiments in economics. How do experimentalists attempt to advance our understanding of economics? The authors give the reader a comprehensive view of the various approaches to experimental economics, including their strengths and weaknesses. -- Peter Bossaerts, California Institute of Technology For this book, expertise is needed in experimental economics, but also in philosophy and psychology. These authors have it all--there is no group better suited to present this material. They explore the objections of some economists against the experimental method and the controversies that exist within the discipline. -- Joep Sonnemans, University of Amsterdam
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
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.
