Milestones in Experimental Economics Research at Caltech

Caltech has been pioneering experimental research fueled by rapidly developing theoretical models since the work of Charlie Plott and Vernon Smith in the 1970s. The unique feature of research conducted by Caltech-affiliated scholars is the dialogue between theoretical and experimental methods used to provide empirical regularities and ultimately improve predictive power in economic and political science theories. This dialogue is possible because Caltech researchers treat economic theory as a unifying language across methods and research topics. This page surveys the milestones in experimental economics that took place at Caltech from 1970s to the early 2000s.

1970s: Market Mechanisms and Market Equilibrium

A core area of investigation has involved how markets reach equilibrium. Starting in the 1970s, Caltech economists have used experimental settings to probe the connection between theory (which predicts a unique equilibrium) and the messy behavior of individuals. As part of that research, they developed new techniques that help us understand what institutions made markets most effective. Read More

1978: Committee Decision-Making

How do voting procedures and bargaining rules affect decisions reached by committee? These questions were and remain at the heart of the formal theoretical work in political science and economics. Caltech researchers used experimental settings to isolate effects of various features of the decision-making process and provide the first such empirical evidence. Read More

1979: Public Goods and Taxation

Several market mechanisms have been theoretically proposed to mitigate the “free-riding” problem that often occurs in collective settings. Which of these mechanisms perform better empirically? Caltech researchers investigated a wide variety of such mechanisms. Read More

1979: Individual Decision-Making

Do people have stable preferences, or do they exhibit a preference reversal phenomenon, which contradicts the expected utility theory? Experimental methodology is an ideal ground for testing such conjectures. Read More

1980s: Information and Elections

Formal models of voting assume that voters know a lot about politics and politicians. Empirical evidence, however, is often at odds with such assumptions. Does the lack of information on the part of voters mean that the forces of political competition are removed from the electoral arena? Read More

1992: The Centipede Game

The ability of rational players to perform backward induction is the basic assumption used by game theoretical analysis. Are people actually capable of doing that? Read More

1995: Quantal Response Equilibrium

Is there a coherent way to incorporate human errors into a decision-making process and into games people play? How does such a model fare in terms of organizing results of various experimental studies? Read More

1990s and early 2000s: Beauty Contest Games and Behavioral Game Theory

Many experiments have shown that people often deviate from playing the equilibrium prescribed by theoretical analysis. How can one make sense of such deviations from equilibrium behavior? Read More

2000s: Networks and Network Formation

How do people choose who to connect to and share information with in social, economic, and political situations? How does this depend on whether agents are homogeneous or heterogeneous? Read More

2010: Committee Deliberations

How does communication affect outcomes reached by committees? Does this differ by the various voting rules that committees use to make decisions? Does it differ depending on the extent of preference diversity among the members? Read More

2010: MRI and Mechanism Design

Read the full history of experimental economics research at Caltech here.