Chapter 85: Experimental Economics

Seda Ertaç & Sandra Maximiano

Experimental economics Being able to test theories and understand the underlying mechanism behind observed phenomena is crucial for scientific progress in any discipline. Experimentation is an important method of measurement in the natural sciences as well as in social sciences such as psychology, but the use of experiments for gathering economic data is a much more recent endeavor. Economics has long been regarded as a nonexperimental science, which has to rely on observations of economic behavior that occur naturally. Experiments, however, have found their way into the economist's toolkit in the past few decades and are now being employed commonly in mainstream economics research in many diverse subfields such as game theory, industrial organization, labor and development economics, and, more recently, macroeconomics. The very first experiment in economics is known to have been conducted by Bernoulli on the St. Petersburg's paradox in 1738 (see Kagel & Roth, 1995, for more ...

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