Experimental economics
Experimental Economics is the use of laboratory experimental methods to evaluate theoretical predictions of economic behaviour.
One of the founders of this field is Vernon Smith of the University of Arizona. Smith has conducted many controlled experiments on the behaviour of mock "buyers" and "sellers", who are told how much they "value" a fictitious commodity, and then asked to competitively "bid" or "ask" on these commodities following the rules of various real world market institutions such as the English auction and the Dutch auction (see Auctions).
Smith has found that the price and quantities traded in such markets quickly converge on the values that would be predicted by the economic theory of perfect competition, in spite of the fact that many of the assumptions of perfect competition (large numbers, perfect information) are not met.
Experiments with the ultimatum game in various cultures have shown that people often act more cooperatively than simple self-interest would predict, but this varies among cultures.
See also
