Experimental Economics: Economic and Game Theoretic Principles in Experimental Research in the Social Sciences

Abstract

Understanding individual and social decisions and how they are affected by the environment andinstitutional constraints is at the heart of the social sciences. With the exception ofpsychology, traditionally in the social sciences empirical evidence is gathered via happenstancedata. Such data are plagued with endogeneity problems and unobserved variables which make itdifficult to draw causal inferences and reliably test theories. In the last thirty yearslaboratory experiments are increasingly adopted, especially in economics. Experimental economicsresearch is often based on formal economic or game theoretical models with clear-cut rules whichallow unambiguous inferences from changes in environmental variables. This model-based approach istightly linked to two principles of experimental economics: the use of task related (monetary)incentives and the proscription of deception. Experimental economics plays an important role intheory and model falsification as well as in digging up behavioral regularities in individual andinteractive decision making. Research in experimental economics was instrumental in thedevelopment of new models of other-regarding preferences, boundedly rational reasoning, adaptivelearning, and ‘noisy’ equilibrium models. The toolbox of economics experiments informs research indecision neuroscience and is also applied in many other fields of the social sciences.Undoubtedly, experimental economics will continue to challenge newly emerging models and suggestnew theories of human behavior and keep on to significantly contribute to knowledge in the socialsciences.