Experimental Economics

Question 1

What is experimental economics?

Answer 1

A branch of economics that tries to recreate situations and tf test theories made by economic theory

Question 2

What is experimental data?

Answer 2

Data that’s come from controlled conditions deliberately created and measures the result

Question 3

Where does observational data come from?

Answer 3

It is a product of ongoing controlled processes

Question 4

3 things economists can’t control for?

Answer 4

Mood
Unspoken preferences
Non-visible attributes
Influence of monetary conditions

Question 5

What are natural experiments?

Answer 5

Experiments that use data from naturally occurring events

Eg. Wars - peak in GDP during, fall after, fall in birth rates during, peak after

Question 6

What are field experiments?

Answer 6

Experiments where data is gathered in naturally occurring environment

Question 7

Issue with field experiments?

Answer 7

Cannot assume Ceteris paribus

Question 8

Explain the corruption example field experiment?

Answer 8

44 rural communities in Liberia, leaders given fixed amount of rice to store for 3 days, measured how much was stolen to indicate corruption levels

Question 9

Explain the microfinance example field experiment?

Answer 9

Study found when microfinance is supplied to women, increase household exp. and increase in schooling for girls, men did not

Question 10

What are lab experiments?

Answer 10

Experimental economics sets up a dedicated lab experiment (all artificial)

Question 11

Benefit and issue of lab experiments?

Answer 11

Benefit: allows economists to control certain variables that are normally naturally occurring

Issue: simplicity of experiment questions reliability of results in the real world

Question 12

What is internal validity? Is it present in field or lab experiments?

Answer 12

Experiment gives correct results within its context - ie. Lab experiment

Question 13

What is external validity? Is it present in field or lab experiments?

Answer 13

Experiment is generalisable outside its exact context ie. Field experiment

Question 14

3 types of things that can be tested in a lab?

Answer 14

Attitudes to risk
Attitudes to own welfare
Rationality of people

Question 15

Important aspect of lab experiment?

Answer 15

Must be given real incentives ie. Real money is gained or lost

Question 16

What is a treatment?

Answer 16

A particular condition of an experiment (control treatment, treatment of interest)

Question 17

What can’t be controlled and how is overcome?

Answer 17

Age
Gender
Ethnic groups
Education level
Tf all have to be randomised

Question 18

First step to starting an experiment?

Answer 18

Diverse recruitment of subjects, each with common knowledge within experiment

Question 19

What is the first option that has to be made? (Define too)

Answer 19

Between-subject design:
Each subject participates in only one treatment

Within-subject design:
Each subject participates in several treatments

Question 20

What is the second option that has to be made? (Define too)

Answer 20

One shot interactions:
No repetition of same situation tf no ‘planning’ incentives

Repeated interactions:
Tf subjects can learn

Question 21

What is the third option that has to be made? (Define too)

Answer 21

Partners:
Group of subjects stay together

Strangers:
Randomly created groups each time

Perfect strangers:
Probability of being rematched with same person=0

Question 22

What is the fourth option that has to be made? (Define too)

Answer 22

Paper and pencil experiment

Computerised experiment

Question 23

3 advantages of paper and pencil experiment

Answer 23

Natural environment
Cheap
No risk of technology malfunction

Question 24

3 advantages of computerised experiment?

Answer 24

Fewer mistakes
Better control
Automatic data collection