COURSE SYLLABUS FOR ECONOMICS 9340

EXPERIMENTAL ECONOMICS

PROFESSOR JAMES C. COX 

Fall 2009

 

This course is a research class in experimental economics that is intended to:

 

 

Prerequisite

 

The prerequisite for this course is Econ 8120 or equivalent microeconomics class or permission of the instructor. 

 

Course Requirements

 

There are three graded course requirements, each worth 1/3 of the grade:

 

1. a midterm exam

2. a research paper due on the last day the class meets

3. a final exam

 

A fourth, ungraded requirement is presentation of the research paper to the class.

 

Class Scheduling

 

The class will meet on Tuesdays and Thursdays, 11:00a.m. – 12:15 p.m. The regular classroom is Sparks Hall room 329. On days when we are conducting in-class experiments, we will meet in the Experimental Economics Laboratory, room 447 of the Andrew Young School of Policy Studies building.

 

No student is required to participate in the learning experiments. Any student not wishing to participate in an experiment can request an alternative assignment consisting of reading professional journal articles on relevant topics.

 

Office Hours and Contact Information

 

The instructor’s office is room 456 of the AYSPS building, 14 Marietta Street. His office

hours are 1:00 p.m. – 3:00 p.m. on Tuesdays and Thursdays and other times by appointment made in class or by sending e-mail to jccox@gsu.edu.


 

Introductory Reading List

 

Adobe (pdf) files for the following assigned readings will be available on the instructor’s home page: http://excen.gsu.edu/jccox. You will need Adobe Reader to print the files. If your computer does not already have Adobe Reader, you can download it for free from the Internet. Additional readings will be assigned, based on students’ topic interests.

  1. V. Smith, “Markets as Economizers of Information: Experimental Examination of the Hayek Hypothesis,” Economic Inquiry, vol. 20, 1982, pp. 165-179.
  2. V. Smith, “An Empirical Study of Decentralized Institutions of Monopoly Restraint,” pp. 83-106 in G. Horwich and J. Quirk (eds.), Essays in Contemporary Fields of Economics. West Lafayette: Purdue University Press, 1981.
  3. V. Smith, “Theory, Experiment, and Economics,” Journal of Economic Perspectives, vol. 3, 1989, pp. 151-169.  
  4. J. Cox, “Some Issues of Methods, Theories, and Experimental Designs,” Journal of Economic Behavior and Organization, 2010 (in press). 
  5. J. Cox, “On Testing the Utility Hypothesis,” Economic Journal, vol. 107, 1997, pp. 1054-1078. 
  6. J. Cox and R. Oaxaca, “Laboratory Experiments with a Finite Horizon Job Search Model,” Journal of Risk and Uncertainty, vol. 2, 1989, pp. 301-350. 
  7. D. Grether and C. Plott, “Economic Theory of Choice and the Preference Reversal Phenomenon,” American Economic Review, vol. 69, 1979, pp. 623-638. 
  8. J. Cox and D. Grether, “The Preference Reversal Phenomenon: Response Mode, Markets and Incentives,” Economic Theory, vol. 7, 1996, pp. 381-405. 
  9. J. Cox, B. Roberson, and V. Smith, “Theory and Behavior of Single Object Auctions,” pp. 1- 43 in V. Smith (ed.), Research in Experimental Economics, vol. 2. Greenwich: JAI Press, 1982. 
  10. J. Cox and R. Oaxaca, “Is Bidding Behavior Consistent with Bidding Theory in Private Value Auctions?” pp. 131-148 in R. M. Isaac (ed.), Research in Experimental Economics, vol. 6. Greenwich: JAI Press, 1996. 
  11. R. Forsythe, T. Palfrey, and C. Plott, “Asset Valuation in an Experimental Market,” Econometrica, vol. 50, 1982, pp. 537-567. 
  12. J. Cox and M. Walker, “Learning to Play Cournot Duopoly Strategies,” Journal of Economic Behavior and Organization, vol. 36, 1998, pp. 141-161. 
  13. C. Holt and S. Laury, “Risk Aversion and Incentive Effects,” American Economic Review, vol. 92, 2002, pp. 1644-1655. 
  14. J. Cox and V. Sadiraj, “Small- and Large-Stakes Risk Aversion: Implications of Concavity Calibration for Decision Theory,” Games and Economic Behavior, vol. 56, 2006, pp. 45-60. 
  15. J. Cox, V. Sadiraj, B. Vogt, and U. Dasgupta , “Is There A Plausible Theory for Risky Decisions?”,  Experimental Economics Center Working Paper, Georgia State University, 2007. 
  16. R. M. Isaac and J. Walker, “Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism,” Quarterly Journal of Economics, vol. 103, 1988, pp. 179-199. 
  17. J. Goeree, C. Holt, and S. Laury, “Private Costs and Public Benefits: Unraveling the Effects of Altruism and Noisy Behavior,” Journal of Public Economics, vol. 83, 2002, pp. 257-278. 
  18. J. Andreoni and R. Petrie, “Public Goods Experiments without Confidentiality: A Glimpse into Fundraising,” Journal of Public Economics, vol. 88, 2004, pp. 1605-1623. 
  19. J. Cox, “How to Identify Trust and Reciprocity,” Games and Economic Behavior, vol. 46, 2004, pp. 260-281. 
  20. J. Cox and C. Deck, “On the Nature of Reciprocal Motives,” Economic Inquiry, vol. 43, 2005, pp. 623-635. 
  21. J. Cox, D. Friedman, and V. Sadiraj, “Revealed Altruism,” Econometrica, vol. 76, 2008, pp. 31–69.
  22. J. List, "On the Interpretation of Giving in Dictator Games," Journal of Political Economy, vol. 115, 2007, pp. 487-493.

 

 

Additional Reading

 

Additional readings of professional journal articles will be selected by the instructor on topics germane to the students’ chosen term paper topics.

 

Learning Outcomes

 

By the end of the semester, a student should be able to:

 

A. Write a term paper containing an original experimental design; and

 

B. Be able to answer questions of the following type.

 

1. Identify the primary reasons for conducting economics experiments and provide illustrative examples from the literature.

 

2. Explain the features of a good experimental design and be able to identify strengths and weaknesses of specific designs.

 

3. Explain the Hayek hypothesis and alternative hypotheses about competitive markets that have been accepted (and taught to students) by many economists and explain what experiments tell us about the empirical validity of these hypotheses.

 

4. Explain what experiments tell us about the compatibility of textbook monopoly pricing with buying and selling through various market institutions, which market institution is most compatible with textbook monopoly pricing and why this market institution has this property. Explain what are the comparative efficiency properties of various market institutions when there is a single seller.

 

5. Explain the revealed preference relation and what it means for a utility function to rationalize a set of price and quantity vectors for a consumer’s purchases. Explain how one can conduct a simple test of the utility hypothesis, why most sources of consumer data are not usable for such a test, how a valid test can be conducted and what has been learned from such a test.

 

6. Explain “revenue equivalence” in auction theory.  Explain how to design an experiment to test for revenue equivalence and what has been learned from such a test.

 

7.  Explain the rational expectations hypothesis, how a simple experiment can be designed for testing the hypothesis and what has been learned from such a test.

 

8. Explain the preference reversal phenomenon, how experiments can be designed to test for preference reversals and what has been learned from such tests.

 

9. Explain the Cournot duopoly model, how to design experiments to test the model and results from such tests.

 

10.  Explain the voluntary contributions mechanism (VCM) for public goods allocation. Explain the design of some experiments with VCM and what the experiments reveal about its properties.

 

11.  Define (a) other–regarding preferences, (b) trust, and (c) reciprocity.  Explain how an experiment can be designed to test for (a) – (c) and known results from such an experiment.

 

12.  Explain “single blind” payoffs and “double blind” payoffs. Explain why an experimenter might use one type or the other.  Provide examples.

 

13.  Define “market institution.” Define “economic environment.” Explain how to decide what to control and what not to control in designing an experiment and provide examples.