Date of Award
Senior Scholars Paper (Open Access)
Colby College. Economics Dept.
Donihue, Michael R
Experimental economics is the newest tool available to improve the research of economists. The first chapter reviews the methods that experimentation employs. The review is important for understanding the construction and running of experiments as well as the criticisms. The second chapter illustrates the methods through an example experiment of the Allais Paradox. The third chapter develops an original experiment involving the pricing decisions of gasoline by owners of adjacent gasoline stations. Anecdotal evidence shows that gas stations located in close proximity to one another often have different prices. This result contradicts existing oligopoly and duopoly theory. An experiment is developed to examine a new set of assumptions that more accurately reflect consumer and firm behavior. The results reflect that a more accurate characterization of behavioral tendencies not only satisfies the observed evidence but the dynamics of duopolies as well. The final chapter addresses the criticisms of experimentation within economics and concludes that careful experimentation can add a tremendous amount to economic research.
Economics -- Methodology, Economics -- Simulation methods, Economics -- Research, Competition, Imperfect, Oligopolies
Recommended CitationGoodman, Albert, "Experimental economics methodologies and applications: price competition among gasoline stations" (2006). Senior Scholar Papers. Paper 104.
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