Three Essays on Experimental Economics

Abstract

There was a time when the conventional wisdom was that, because economics is a science concerned with complex, naturally occuring systems, laboratory experiments had little to offer economists. But experimental economics has now become a well-established tool that plays an important role in helping game theory bridge the gap between the study of ideally rational behavior modeled in theory and the study of actual "real-world" behavior of agents. Although it has older antecedents, experimental economics is a fairly new line of work, having originiated more or less contemporaneously with game theory. As economist focused on microeconomic models which depend on the preferences of the agents, the fact that these are dificult to observe in natural environments made it increasingly attractive to look to the laboratory to see -in a controlled environment- whether the assumptions made about individuals were descriptive of their behavior. But game theory is the part of economic theory that does not focus solely on the strategic behavior of individuals in economic environments, but also other issues that will be critical in the design of economic institutions, such as how information is distributed, the influence of agents' expectations and beliefs, and the tension between equilibrium and efficiency. Game theory has already achieved important insights into issues sucs as the design of contracts and allocation mechanisms that take into account the sometimes counterintuitive ways in which individual incentives operate in environments with decision makers that have different information and objectives.<br/>This thesis is divided into three chapters that present self-contained studies of economic situations where experiments may help game theory to explain field observations. In deriving the results, besides the game theory literature, rigorous statistical and econometric methods are used.