This second Cambridge University Press collection of papers by Vernon L. Smith, a creator of the field of experimental economics, includes many of his primary authored and coauthored contributions on bargaining and market behavior between 1990 and 1998. The essays explore the use of laboratory experiments to test propositions derived from economics and game theory. They also investigate the relationship between experimental economics and psychology, particularly the field of evolutionary psychology, using the latter to broaden the perspective in which experimental results are interpreted. The volume complements Professor Smith's earlier work by demonstrating the importance of institutional features of markets in understanding behavior and market performance. Specific themes investigated include rational choice, the notion of fairness, game theory and extensive form experimental interactions, institutions and market behavior, and the study of laboratory stock markets.
• State-of-the-art assessment of experimental perspective on bargaining and market behavior, hot topic in economics • Vernon Smith is cofounder of the field of experimental economics; likely Nobel Prize Winner • Rigorous experiments written up in accessible language; will be equally of interest in Europe and Australia as well as North America
Part I: 1. Rational choice: the contrast between economics and psychology; 2. Experimental tests of the endowment effect; 3. Monetary rewards and decision costs in experimental economics; 4. Fairness, effect on temporary and equilibrium prices in posted-offer markets; Part II. Bargaining theory, Behavior and Evolutionary Psychology: 5. Preferences, property rights and anonymity in bargaining games; 6. Social distance and other regarding behavior in dictator games; 7. On expectations and monetary stakes in ultimatum games; 8. Game theory and reciprocity in some extensive form experimental games; 9. Behavioral foundations of reciprocity: experimental economics and psychology; Part III. Institutions and Markets: 10. Reflections on some experimental market mechanisms for classical environments; 11. Experimental methods in the political economy of exchange; 12. Individual rationality, market rationality, and value estimation; 13. Market contestability in the presence of sunk costs; 14. The boundaries of competitive price theory: expectations, convergence and transaction cost; 15. Off-floor trading, disintegration and the Bid-Ask spread in experimental markets; 16. Bertrand–Edgeworth competition in experimental markets; 17. An experimental examination of the Walrasian Tatonnement mechanism; Part IV. Stock Markets and Bubbles: 18. Stock markets bubbles in the laboratory.