Experimental Economics

DEFINITION of 'Experimental Economics'

A branch of economics that focuses on individual behavior in a controlled laboratory setting or out in the field. Experimental economics helps to prove or disprove economic theories and create predictions and insights about real-world behavior.

BREAKING DOWN 'Experimental Economics'

2002 Nobel laureate Vernon Smith was a pioneer in the field of experimental economics. His early experiments focused on theoretical equilibrium prices and how they compared to real-world equilibrium prices. Smith also conducted experiments to test theoretical assumptions about different types of auctions, allocating airport time slots and organizing energy markets. Smith's economics experiments were groundbreaking in part because it had previously been assumed that economic research could only be based on real-world observations and data. His work set the standard for good economics experimentation.



RELATED TERMS
  1. Vernon L. Smith

    An American economist who won the Nobel Prize in Economics in ...
  2. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  3. Mathematical Economics

    Mathematical economics is a discipline of economics that utilizes ...
  4. Economic Equilibrium

    A condition or state in which economic forces are balanced. These ...
  5. General Equilibrium Theory

    General equilibrium theory studies supply and demand fundamentals ...
  6. Mainstream Economics

    A term used to describe schools of economic thought considered ...
Related Articles
  1. Markets

    Economist Guide: 3 Lessons Adam Smith Teaches Us

    Learn three critical lessons about economics from 18th century philosopher Adam Smith, considered by many to be the father of economics.
  2. Markets

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
  3. Markets

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  4. Trading

    Behavioral Finance: Background

    By Albert PhungBefore we go over the specific concepts behind behavioral finance, let's take a more general look at this branch of finance. In this section, we'll examine how it compares to conventional ...
  5. Insights

    Adam Smith's Legacy

    Adam Smith popularized many of the ideas that created classical economics.
  6. ETFs & Mutual Funds

    A Quick Guide On Behavioral Funds

    Investopedia explores the working of behavioral funds, their benefits and risks, and an analysis of their past returns.
  7. Markets

    Adam Smith And "The Wealth Of Nations"

    Adam Smith's 1776 classic may have had the largest global impact on economic thought.
  8. Markets

    Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.
  9. Trading

    Modern Portfolio Theory vs. Behavioral Finance

    Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. Perhaps the easiest way to think about their arguments and positions ...
  10. Markets

    Macroeconomics: Conclusion

    By Stephen Simpson Given the enormous scale of government budgets and the impact of economic policy on consumers and businesses, macroeconomics clearly concerns itself with significant issues. ...
RELATED FAQS
  1. What are some of the limitations and drawbacks of economics as a field?

    Find out why the field of economics is full of controversy. Policy decisions, political campaigns and personal finances are ... Read Answer >>
  2. What is the difference between accounting and economics?

    Discover the difference between accounting and economics by comparing and contrasting the financial discipline of accounting ... Read Answer >>
  3. How does behavioral economics treat risk aversion?

    Learn about the relationship between decision-making and risk, as described by one of the foundational theories in behavioral ... Read Answer >>
  4. What is general equilibrium theory in macroeconomics?

    Achieving equilibrium of prices in a single or multi-market setting involves a bidding process that is informed precisely ... Read Answer >>
  5. What does the term 'invisible hand' refer to in the economy?

    Discover and understand the concept of the "invisible hand" as explained by Adam Smith, considered the founder of modern ... Read Answer >>
  6. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center