Introduction to Experimental Economics University of Essex Spring 2013; Thursdays 16:00-18:00; Room 5A.332 Friederike Mengel Outline: This course provides an Introduction into the area of Experimental Economics. We will discuss basic methodological questions, the design of experiments and data analysis. We will also discuss the role of experiments in relation to other areas in Economics, introduce standard software used to run experiments and review some research topics in experimental research. Particular focus will be on bargaining experiments, public good experiments, decision experiments and network experiments. Students will have the possibility to review a research paper or present a project proposal themselves at the end of the course.

Structure: Lecture 1 (January 17): Introduction, Methodology of Experiments References: 1. 2. 3. 4. 5.

Slides Bardsley et al (2010), Experimental Economics, Princeton University Press. Camerer, C. F. (2003), Behavioral Game Theory: Experiments in Strategic Interaction, Princeton University Press. Friedman and Sunder (1994), Experimental Methods: a Primer for Economists, chapters 1 and 2 Kagel, J. and A.E. Roth (eds) (1995), Handbook of Experimental Economics, Princeton University Press.

Advertisement: On January 21st (Monday)at 1pm there will be an experimental seminar by Aniol LLorente Saguer (MPI Bonn) in the Common Room 5B.307 . This is not part of the course, but you are very much invited to attend. ------------------------------------------------------------------------------------------------------------------------------------Lecture 2 (January 24): 4pm-5pm Experimental Seminar by Pedro Rey Biel (UAB), Common Room 5B.307 5.15pm-6pm Room 5A.332 Discussion. Allocation of Presentations for L6. -----------------------------------------------------------------------------------------------------------------------------------

Lecture 3 (January 31): The process of designing an experiment; Data Analysis; Software; References: 1. 2. 3. 4. 5. 6. 7. 8.

Slides Brandts, J. and G. Charness (2000), Hot vs Cold: Sequential Response and Preference Stability in Experimental Games, Experimental Economics 2, 227-238. Dal Bo, P. and G. Frechette (2012), Strategy Choice in the Infinitely Repeated Prisoner’s Dilemma, mimeo. Fischbacher, U. (2007), “z-Tree: Zurich Toolbox for Ready-made Economic Experiments,” Experimental Economics 10, 171-178 Frechette, G. (2011), Session-Effects in the Laboratory, Experimental Economics, Volume 15, Issue 3, pp. 485-498 Gneezy, U. and A. Rustichini (2000), ``Pay Enough or don’t pay at all’’ Quarterly Journal of Economics, 791-810. Lehmann, E.L. (2006), Nonparametrics: Statistical Methods Based on Ranks, Springer New York. Mengel, F. and R. Peeters (2011), Strategic Behavior in Repeated Voluntary Contribution Experiments, Journal of Public Economics 95(1), 143-148.

Advertisement: On February 6 at 1pm, there will be an experimental seminar by Christoph Vanberg (Uni Heidelberg) on Bargaining. -------------------------------------------------------------------------------------------------------------------------------------Lecture 4 (February 7): Topic: Bargaining Experiments; Public Good Experiments References: 1.

Andreoni , J. and Croson, R. (2008) ``Partners versus Strangers: random rematching in public good experiments, Handbook of Experimental Economics, Elsevier. 2. Binmore, K., A. Shaked and Sutton (1985), Testing noncooperative bargaining theory: A preliminary study, American Economic Review 75(5), 1178-1180. 3. Engelmann and Strobel (2004), Inequality Aversion, Efficiency and Maxmin Preferences in Simple Distribution Experiments, American Economic Review 94(4), 857-869. 4. Grimm and Mengel (2011), Let me sleep on it: Delay reduces rejection rates in ultimatum games, Economics Letters 111(2), 113-115. 5. Gueth, W., R. Schmittberger and B. Schwarze (1982), “An Experimental Analysis of Ultimatum Bargaining,” Journal of Economic Behavior and Organization 3, 367–88. 6. Henrich et al (2001), In search of homo Economicus: Behavioral Experiments in 15 small-scale societies, American Economic Review 91(2), 73-78. 7. Isaac, Walker and Thomas (1984), Divergent Evidence on free-riding: An experimental examination of possible explanation, Public Choice 43(2), 113-149. 8. Ochs, J. and A. Roth (1989), An Experimental Study of Sequential Bargaining, American Economic Review 79(3). 9. Rand, Greene and Nowak (2012), Spontaneous Giving and Calculated Greed, Nature 489, 427-430. 10. Sanfey et al (2003), The Neural Basis of Economic Decision Making in the Ultimatum Game, Science 300, 1755-1758.

Advertisement: On February 13 there will be an Experimental Seminar by Anna Gumen (NYU) in the Economics Common Room.

Lecture 5 (February 14): Topic: Decision Experiments; Network Experiments ------------------------------------------------------------------------------------------------------------------------------------Lecture 6 (February 21): Student Presentations (either paper from list or your own proposal) List of papers to select from 1.

"Slow to Anger and Fast to Forgive: Cooperation in an Uncertain World.", Fudenberg, Drew, David G. Rand, and Anna Dreber. 2012, American Economic Review, 102(2): 720-49. 2. "What Do You Think Would Make You Happier? What Do You Think You Would Choose?.", Benjamin, Daniel J., Ori Heffetz, Miles S. Kimball, and Alex Rees-Jones. 2012., American Economic Review, 102(5): 2083-2110. 3. "Risk Preferences Are Not Time Preferences." Andreoni, James, and Charles Sprenger. 2012, American Economic Review, 102(7): 3357-76. 4. "Imperfect Public Monitoring with Costly Punishment: An Experimental Study." Ambrus, Attila, and Ben Greiner. 2012, American Economic Review, 102(7): 3317-32. 5. ``Reconsidering the Effect of Market Experience on the Endowment Effect’’, D. Engelmann and G. Hollard, Econometrica (2010), 78(6), 2005-2019. 6. ``Unwilling or Unable to Cheat? Evidence from a Tax Audit Experiment in Denmark’’, H. Kleven, M. Knudsen, C. Kreiner, S. Pedersen and E. Saez, Econometrica (2011), 79(3), 651-692. 7. ``Clocks and Trees: Isomorphic Dutch Auctions and Centipede Games’’, J. Cox and D. James, Econometrica (2012), 80 (2), 883-903. 8. ``Vote Buying and Reciprocity’’, F. Finan and L. Schechter, Econometrica (2012), 80(2), 863-883. 9. A paper of your choice (discuss with me first..) 10. Your own project proposal

Acknowledgement: Some of the material used in the slides is taken from previous courses taught by Matt Embrey, Kyle Hyndman and Arno Riedl at Maastricht. Thanks !!