On this page there are notes, problem sets, and other items for the Master’s Game Theory and Experiments course. The textbook used was Gibbons. Game Theory for Applied Economists. Princeton, 1992. Please be aware that there may be errors in the notes – it is not intentional, but they do happen.
Chapter Outlines for Gibbons:
Methods of Proof (from Epp)
Chapter 1 Simultaneous games of complete information
Chapter 2 Sequential games of complete information
Chapter 1/2 Games with a continuum of strategies (Cournot and Bertrand)
Chapters 3 Simultaneous games of incomplete information
Chapter 4 Sequential games of complete information
Monty Hall problem (explanation of Bayes Theorem)
Notes on Experiments
Some reasons why economic experiments with humans are reviewed
There are many experimental economists who would argue that, and I am paraphrasing even though it is in quotes, “We are not requiring anything of subjects than we might in a typical classroom setting, so why should we have to deal with an IRB or Human Subjects Committee”. Here are some reasons why:
The Tuskegee Syphilis Experiment (1932-1972)
The Nazi Medical Experiments (WWII)
Those first 2 experiments involve medical practices, so they have a somewhat questionable link to what an experimental economist does (though that is changing over time). This next set of experiments are a little closer to what an experimental economist might do, except that we might give the “teacher” incentives for each time he obeyed an order (though many didn’t need the additional incentives to obey the experimenter).
The Milgram Experiments (1961-1985)
UNCC Human Subjects Information
Background readings on the experimental methodology and some early market experiments:
Note that these links are from JSTOR so you may need to log into the library’s system using your Novell account if you wish to access them from home.
Smith, V. “Microeconomic Systems as Experimental Science” American Economic Review 72 (1982) 923-955
This paper lays the groundwork tying experiments and microeconomics together as a science. It’s a more rigorous discussion that can be read along with chapters 3 and 4 of the Friedman and Cassar text.
Siegel, S. and D.A. Goldstein “Decision-making Behavior in a Two-Choice Uncertain Outcome Situation” Journal of Experimental Psychology 57:1 (1959) 37-42.
This paper is in the psychology field but is one of the key reasons that monetary rewards are used in economics experiments.
Smith, V. “An Experimental Study of Competitive Market Behavior” Journal of Political Economy 70 (1962) 111-137. Also, see Errata on pages 322-323 of the next issue of the journal.
This is Smith’s early experiment on the double auction institution that establishes that the economic institution is an important feature that can affect market outcomes.
Plott, C. “Economics in 2090: The Views of an Experimentalist” Economic Journal 101 (1991) 88-93.
This is just a quick read by Plott (basically the guy who got Smith to start doing experiments again) trying to predict the future of experiments in economics.
Smith, V. “Constructivist and Ecological Rationality in Economics” American Economic Review 93 (2003) 465-508.
This is Smith’s revised Nobel lecture.
Kahneman, D. “Maps of Bounded Rationality: Psychology for Behavioral Economics” American Economic Review 93 (2003) 1449-1475.
This is Kahneman’s revised Nobel lecture.
Chamberlain, E. “An Experimental Imperfect Market” Journal of Political Economy 56 (1948) 95-108.
This is Chamberlain’s experiment on the “random meetings” institution. This is the experiment that spurred Smith to run the double auction experiments.
There are many more papers that a budding experimentalist can read. These are just to get you started and provide some background of where experimental economics has come from and where it has gone. Also, there is a long history of individual choice experiments (dating back to Thurstone before the Chamberlinian experiment) as well as some interesting early game theoretic experiments done in the 1950s and 1960s.
There are books on bargaining behavior by Fouraker and Siegel (one in 1960 and one in 1963 – I have read most of the 1963 book and enjoyed it) and there is a book containing game theoretic experiments edited by Thrall, Coombs, and Davis, Decision Processes, published in 1954 (I have not read this book so I do not know how useful one might find it). Also, for some of the introductory material I will draw from Chapter 1 of The Handbook of Experimental Economics edited by John Kagel and Al Roth, but you do not need to read that material.
Problem Set 1; Answers
Problem Set 2; Answers
Problem Set 3; Answers
Problem Set 4; Answers
Problem Set 5; Answers