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Experimental economics on the web.

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Experimental Economics

We conduct online experiments into economic decision making. How do people bid in auctions? What better way than to invite them to participate in a controlled auction with real money and observe their behavior? How do people bargain? We can watch real bargaining to arrive at an answer. Experimental Economics is a field of study that requires economists to confront reality (see sidebar) - and that reality is represented by the actual decisions made by our subjects.

Subjects participate online in a variety of experiments, and are usually paid based on their performance. After all, good decisions should be rewarded more than bad ones!

What do we study? In the past, our studies have involved auctions, online price discrimination, and Internet pricing, among others. You may learn about these past experiments on this site.

What is it?

Economics is the study of incentives. How many cars do people buy at a certain price? What kind of salary structure induces employees to work hard?

To answer these questions, theories are constructed about how people react to the incentives. Then, using these models of behavior, economists suggest how firms should set prices, what antitrust regulators should focus on, and so on.

Experiments examine, validate, and sometimes reject these theories by placing actual economic agents (people) in controlled environments, provide them with structured incentives, and measure their behavior.