A paper on behavioral finance in PDF format. We describe an experiment in which subjects are engaged in a cognitively challenging, non-strategic task. In the context of a decision cost model, we discuss subjects' propensity to arrive at the optimal solution when the decision environment changes, specifically, when the cost of making errors increases. An attempt to identify the historical context out of which contemporary experimental economics has grown by identifying early experiments which have initiated streams of experimental investigation that continue to the present. Their objective is to promote the study of models of interactive learning and social evolution with a view to providing an appropriate foundational basis for modeling in economics and related social sciences.
Game theory is used as the focus for such studies.
This paper describes experiments where we investigate how people form expectations in the simplest dynamic economic model, the cobweb model, without any knowledge of the underlying market equilibrium equations. And game theory has already achieved important insights into issues such as the design of contracts and allocation mechanisms which take into account the sometimes counterintuitive ways in which individual incentives operate in environments having decision makers with different information and objectives. My web contains pages on my research and teaching interests in economic science, especially my recent work in game theory and experimental economics. I have been investigating how people learn mutually consistent behavior and constructing a theory of the origin of equilibrium outcomes. The Laboratory is devoted to the development and applications of a laboratory experimental methodology for a broad range of disciplines.