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From a pioneer in experimental economics, an expanded and updated edition of a textbook that brings economic experiments into the classroom
Economics is rapidly becoming a more experimental science, and the best way to convey insights from this research is to engage students in classroom simulations that motivate subsequent discussions and reading. In this expanded and updated second edition of Markets, Games, and Strategic Behavior, Charles Holt, one of the leaders in experimental economics, provides an unparalleled introduction to the study of economic behavior, organized around risky decisions, games of strategy, and economic markets that can be simulated in class. Each chapter is based on a key experiment, presented with accessible examples and just enough theory.
Featuring innovative applications from the lab and the field, the book introduces new research on a wide range of topics. Core chapters provide an introduction to the experimental analysis of markets and strategic decisions made in the shadow of risk or conflict. Instructors can then pick and choose among topics focused on bargaining, game theory, social preferences, industrial organization, public choice and voting, asset market bubbles, and auctions.
Based on decades of teaching experience, this is the perfect book for any undergraduate course in experimental economics or behavioral game theory.
- New material on topics such as matching, belief elicitation, repeated games, prospect theory, probabilistic choice, macro experiments, and statistical analysis
- Participatory experiments that connect behavioral theory and laboratory research
- Largely self-contained chapters that can each be covered in a single class
- Guidance for instructors on setting up classroom experiments, with either hand-run procedures or free online software
- End-of-chapter problems, including some conceptual-design questions, with hints or partial solutions provided
- Preface
- 1 Introduction
- 2 Price Discovery and Exclusion
- I INDIVIDUAL DECISIONS: RISK AVERSION, PROSPECT THEORY, AND LEARNING
- 3 Risk and Decision Making
- 4 Prospect Theory and Anomalies
- 5 Bayes’ Rule
- 6 Belief Elicitation and Ambiguity Aversion
- 7 Individual and Social Learning
- II BEHAVIORAL GAME THEORY
- 8 Some Simple Games: Competition, Coordination, and Guessing
- 9 Multi-Stage Games, Noisy Behavior
- 10 Randomized Strategies
- 11 Choice of Partners, Social Dilemmas
- 12 Contests and Rent Seeking
- 13 Methodology, Nonparametric Tests
- III SOCIAL PREFERENCES
- 14 Bargaining
- 15 Trust, Reciprocity, and Principal-Agent Games
- 16 Voluntary Contributions
- 17 The Volunteer’s Dilemma
- 18 Externalities, Congestion, and Common-Pool Resources
- 19 Voting and Politics Experiments
- IV MARKET EXPERIMENTS
- 20 Monopoly, Cournot, and Cross-Market Price Competition
- 21 Market Power, Collusion, and Price Competition
- 22 Supply Chains
- 23 Adverse Selection in Lemons and Insurance Markets
- 24 Asset Markets and Price Bubbles
- 25 Bank Runs and Macro Experiments
- V AUCTIONS AND MECHANISM DESIGN
- 26 Private Value Auctions
- 27 The Winner’s Curse
- 28 Multi-Unit Auctions: Emissions, Water, License Plates, Securities
- 29 Combinatorial and Two-Sided Auctions
- 30 Matching Mechanisms
- Appendix 1: Hints for End-of-Chapter Problems
- References
- Appendix 2: Instructions for Class Experiments
- Index