Experiments in economics involve gathering human subjects in a classroom or a computer laboratory, presenting them with a situation and making them take decisions that are monetarily incentivised. These decisions will later be analysed statistically or econometrically to yield results that confirm, but also challenge, predictions of economic theory, thereby expanding the boundaries of knowledge regarding human economic behaviour and its motives.

An Introduction to Experimental Economics details the methodology, procedure and protocol to be followed while conducting experiments in economics. It draws the contours of the newly emerging discipline through the main areas where experiments are being used:

· games involving strategic decisions where there are two players and the decision of one player is contingent upon how she expects the other player to behave,

· public goods games designed to test the existence of the free rider problem through a voluntary contributions mechanism, and

· games involving a choice between two or more lotteries that explain decision-making under conditions of uncertainty.

A unique feature is the discussion on experiments designed to elicit the impact of community, caste, religion and multiplicity of culture, based on the author’s rigorous work in the field. Written in simple language, and with practical applications in mind—a chapter is devoted on how to use z-Tree, an open source software which can be used to effectively run experiments in a lab—this book will interest students and scholars of economic theory and its empirical verification.

Gautam Gupta is Professor, Department of Economics, Jadavpur University, Kolkata.

List of Tables, Boxes and Figures

List of Abbreviations

Acknowledgements

Publisher’s Acknowledgements

1. Introduction to Experimental Economics

• Early Beginnings in Experiments

• Advantages of Experiments

• Some Recent Applications of Experiments in Economics

• Experiments Outside a Computer Laboratory

• Uses of Experiments in Economics

• The Philosophy of Experimental Economics

• Note on the Organisation of the Volume

1. Experiments with Games of Strategic Choices

• Prisoner’s Dilemma in Experiments

• The Ultimatum Game: Altruism or Fairness

• Checking for Altruism: The Dictator Game

• Motivating Fairness: The Trust Game

• Rationality and Backward Induction: The Centipede Game

• The Coase Theorem and Bargaining Solutions

1. Experiments with Public Goods

• The Free Rider Problem in Public Goods

• The Voluntary Contributions Mechanism

• Results from the First Experiment with Public Goods

• Variations of the Public Good Game

• Voting for a Public Good

1. Individual Decisions under Uncertainty

• Review of Expected Utility Theory

• Individual Choice under Uncertainty: The Allais Paradox

• Common Ratio Lotteries

• Probability Triangle Representations

• Attitude towards Risk

• Some Important Lottery Choice Experiments

1. Various Types of Experimental Designs

• The Field Experiment

• Experiments across Regions and Cultures

• Experiments Involving Gender, Religion and Class

• Field Experiments with Subjects having a Common Lived Experience

• The Public Goods Game in the West Bengal Sundarbans

• The Public Goods Game in the Sundarbans in Bangladesh

• Natural Field Experiments

• Non-Monetised Experiments

1. The Methodology and Protocol of Experimental Economics

• Experimental Methods

• The Protocol of Experiments in Economics

• Choosing the Venue

• Recruiting Subjects

• Delivering the Instructions

• Running the Experiment

• Monetary Incentives for the Experiment

• Consent and other Ethical Issues

• Follow Up

• Use of Deception

• Building a Computer Laboratory

1. Introduction to Programming using z-Tree

• Programming

• Adding a New Stage

• Declaring Variables

• Input and Output

• Programming a Public Goods Experiment

• Conditional Statements and Sequential Experiments

• Programming an Ultimatum Game

• Executing a Programme

• Weblinks and Programming without z-Tree

• Some Useful Function Commands

Bibliography