Experimental Investigations of Laboratory Markets Under Conditions of Substantially Increased Time Frame, Scope and Scale

California Institute Of Technology, Pasadena CA

Investigators

Abstract

The project continues an exploration of the properties of experimental markets that operate on a time frame, scope and scale substantially beyond market systems that have been studied to date. Advances in technology, coupled with significant scientific progress, have made possible the implementation and control of laboratory experiments that could not be imagined a few years ago. The NSF funded project, which was initiated in late 1997, increased the number of markets operating in the software during an experiment from the two or three market maximum, typical of current studies, to over two hundred and the number could be increased many multiples of that number. The time devoted to an experiment was increased from two or three hours to two days but the technology and methodology could support experiments that last weeks. The number of subjects was to be increased from the dozen or so typical of current laboratory experiments to ninety in an actual experiment but the technology could support thousands. The research purposed removes constraints, opens new economic phenomena for study by laboratory experimental methods, develops new methodology and enhances the relevance of laboratory experimental results for applied purposes. The research is focused on three broad objectives. The first is to initiate a process of identifying and classifying the roles of market time frames, scope and scale in shaping market behavior. The first phases of research involve the creation of large scale/scope experiments that incorporate critical aspects of well-researched, small-scale experiments. While the proposed large-scale experiments are substantially new, the links to previous work will make them 'anchors' that can be used for orientation in a variety of different experiments in large environments. The second, and major objective is to open for scientific inquiry issues that cannot be studied within the context of existing technology, methodology and scale of operation. Completely new research topics and variables will be addressed as the possible influences of limited time, scope and scale are better understood. Both classical theory and applied theory involve the interaction of multiple markets, interdependencies, information asymmetries and mixed institutions including multiple organizations. However, experimentation on such topics has been limited because appropriate environments could not be created. The research project will create them, interpret the experimental implementation and analyze the results. The third objective is to develop the methodologies, procedures and technologies needed to support such experiments. The basic technology and management have been demonstrated as feasible but many issues remain. Subject screens, information feedback and general decision making environments, when operating in complex experiments, require research. Data displays and new methods of viewing results of experiments are also needed to facilitate the analysis from the new data source. Additional experimental management technology is needed, especially if the methodology is to pass the test of portability to other experimentalists.