 About Experimental Economics
New to Experimental Economics? Let us answer a few questions...
What Is ESI?
The Economic Science Institute at Chapman University is an academic center dedicated to understanding socioeconomic behavior. ESI uses the laboratory method of inquiry to study the role human institutions play in creating social rules and order, and also builds and tests market and management systems. ESI’s research spans the fields of accounting, economics, finance, information systems, engineering, psychology, neuroscience, computer science and philosophy.
What Is Experimental Economics?
Traditionally, economists relied heavily on mathematical abstractions to understand how people behave and how markets work. But Vernon Smith recognized that markets in natural environments are dynamic and operate in specialized institutional settings. He began laboratory work to determine if those mathematical abstractions actually described market behavior, and whether they could be tested using a scientific approach.
This method has become known as Experimental Economics. Today, ESI uses cash-motivated students in experiments that use real-world incentives to better understand how markets and other exchange systems work.
 Why Use Experimental Economics in the Classroom?
One of the challenges for economics students is that classes often start with theory, dealing in abstract principles that aren’t intuitive. But in our courses students start by participating in experiments related to markets and other exchange settings before discussing the theory behind the experiment.
After an experiment is complete, students have the opportunity to observe and discuss how well their own behavior – before they had any knowledge of the theory – conforms to the economic principles being examined. Sometimes traditional economic tools do an excellent job of organizing and explaining their behavior, and sometimes they don’t. Either way, the class explores the fundamental question: why?
Do You Want to Read More About Experimental Economics?
See the following resources:
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Smith, V. Economics in the Laboratory, Journal of Economic Perspectives 8(1), 113-131, 1994. (Web-published with permission.)
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Smith, V. Experimental Methods in Economics, The New Palgrave: A Dictionary of Economics, John Eatwell, Murray Milgate, and Peter Newman, 1987 (reproduced with permission of Palgrave.)
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Smith, V. Microeconomic Systems as an Experimental Science, American Economic Review 72(5), 923-955, 1982. (Web-published with permission.)
- Wilson, B. Experimental Economics and Antitrust: What Can We Learn from Laboratory Markets? Antitrust, 21(2), 54-58, 2007. (Web-published with permission.)
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