Why is Vernon Smith called the father of experimental economics? Vernon Smith began conducting his first experiments on his students while still studying at Purdue University. He noticed that despite the lack of information and the small number of subjects, participants quickly came to the competitive equilibrium of the game. He also noted that often the conditions of perfect information and a large sample are far from a guarantee of equilibrium efficiency, which ran counter to classical economic theory.
In 1962, Smith's early research was summarized in the paper "An Experimental Study of Market Behavior" (published in the Journal of Political Economy), which is still considered the seminal work in the field of experimental economics.
Smith's ideas quickly gained recognition and he soon continued his research together with other famous economists. Gradually, thanks to experiments, new properties of markets, pricing and decision-making by economic agents were discovered and studied.
Today, a huge number of works based on experimental methods are published and the number of laboratories around the world is growing steadily.
What topics does experimental economics cover?
At the moment, most of the research is devoted to the following sections:
Non-cooperative games and equilibria in them
Work in the field of bilateral and multilateral trading
Design of economic mechanisms
Public Good Games
Markets and market structures
Financial markets and information
Games in normal and expanded form
Individual decision making
Co-op games
Field experiments
Experimental economics is by no means limited to these topics. Most of the experiments are original games and surveys, on which more than one person works. And, perhaps most importantly, experimental economics is a storehouse of new ideas and unusual approaches to the study of economic theory.
