experimental economics nobel 011603

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Experimental Economics A Discussion by Elizabeth Hoffman, President 2002 Nobel Prize in Economics Daniel Kahneman Vernon Smith

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"For having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty" "For having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms" Won the 2002 Nobel Prize in Economics…Why? Daniel Kahneman Princeton University Born: 1934 Vernon Smith George Mason University Born: 1927

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Induced Demand and Supply Functions

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Ultimatum; FHSS Results, Divide $10, N=24 Dictator; FHSS Results, Divide $10, N=24 FHSS Results Figure 1 % Offer % Rejection % Frequency % Frequency Offer $ Offer $

Payoff ChartFigure 2Seller ChoosesPRICE (in $): 

Payoff Chart Figure 2 Seller Chooses PRICE (in $) Buyer Chooses to BUY NOT BUY

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Ultimatum; Random Entitlement, FHSS Instructions, Divide $10, N=24 Ultimatum; Contest Entitlement, FHSS Instructions, Divide $10, N=24 Ultimatum; Random Entitlement, Exchange, Divide $10, N=24 Ultimatum; Contest Entitlement, Exchange, Divide $10, N=24 % Offer Figure 3 % Frequency % Frequency % Frequency % Frequency Offer $ Offer $ Offer $ Offer $ % Rejection

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Ultimatum; Random Entitlement, FHSS Instructions, Divide $10, N=24 Ultimatum; Contest Entitlement, Exchange, $10, N=24 Ultimatum; Random Entitlement, FHSS Instructions, Divide $100, N=27 Ultimatum; Contest Entitlement, Exchange, $100, N=23 Figure 4 % Offer % Rejection % Frequency % Frequency % Frequency % Frequency Offer $ Offer $ Offer $ Offer $

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Divide $10 random entitlement Each of the two bottom treatments are the same as the one above it, but with the instructions prompting the seller as follows: “Before making your choice, consider what choice you expect the buyer to make. Also consider what you think the buyer expects you to choose.” Offer was Accepted % Frequency % Frequency % Frequency % Frequency Divide $10 contest entitlement Figure 5 Offer $ Offer $ Offer $ Offer $ Offer was Rejected

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Dictator; Random Entitlement, Divide $10, N=24 Dictator; Contest Entitlement, Exchange, N=24 Dictator; Random Entitlement, Divide $10, Double Blind 1, N=36 Dictator; Random Entitlement, Divide $10, Double Blind 2, N=41 Figure 6 % Frequency % Frequency % Frequency % Frequency Offer $ Offer $ Offer $ Offer $

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Dictator Experiments Figure 7

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Dictator Games Charity Experiments Figure 8 Anonymous Recipient Charity Recipient