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. Insights

    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. Insights

    The History Of Economic Thought

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

    Adam Smith: The Father Of Economics

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

    Adam Smith's Legacy

    Adam Smith popularized many of the ideas that created classical economics.
  5. Financial Advisor

    A Quick Guide On Behavioral Funds

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

    Adam Smith And "The Wealth Of Nations"

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

    Nobel Winners Are Economic Prizes

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

    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 ...
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 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 >>
  6. 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 >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center