UNITED STATES NAVAL ACADEMY
Quantitative
Economics Seminar: The Experimental
Economics Seminar
Mathematics
Professor:
Professor:
Professor Charles Mylander
Office: Chauvenet 349
Phone: 3-6744
Office hours: 0900 to 1630. I teach MWF 5th and 6th
periods, and TR 10th period.
E-mail: wcm@usna.edu,
or at home mylander@friend.ly.net
Professor:
Assistant Professor
Office: Nimitz 78
Phone: 3-6888
Office hours: MTWRF 2nd, I teach MWF 3rd
and 4th and TR 10th periods, so please make an
appointment for any other time.
E-mail: pschmitt@usna.edu
(the best way to reach me!)
Please READ AND RETAIN this policy statement.
SA475E
is the capstone course for the Quantitative Economics major. In this seminar students are given the
opportunity to work on independent research under the close supervision of both
the Economics and Mathematics Department Faculty. The course instructors of this section have
chosen experimental economics and game theory to be the topics of your seminar.
The focus of the
course is your conducting and analyzing an economic experiment, or using a game
theoretic model to analyze a multiperson decision situation. Your research will be documented in a paper
and presented in a project briefing towards the end of the course. The project paper and briefing are the most
important part of the course.
In the first
seven weeks the course instructors will take about 60% of the class time
presenting material on the seminar topics, teaching you about experimental
economics and game theory. About 40% of
the class time will be devoted to having the students reporting on their
progress in developing their project proposals.
They will present ideas found in the literature, and describe
topics/problems they think may provide a subject for the project portion of the
course. Some time will be returned to
the students to work on developing their project proposals.
During the
remainder of the course you will be working on your research project. One of the seminar leaders will be assigned
as your project advisor. You must confer with your project advisor at
least once a week and on a less frequent basis you will be directed to
brief the other seminar leader on your project.
In this seminar
the students must choose to conduct their research in one of two overlapping
areas: game theory or experimental economics.
Game theory is broadly interpreted as the study of multiperson decision problems. The disciplines most involved in game theory are economics, mathematics, and military science. Students working on a project using game theory will use concepts and skills acquired in other mathematics and economics courses to formulate a matrix game model and estimate the payoff matrix for a scenario of their choice. For 2-person game models optimal min-max solutions must be found. Examples of areas using matrix games in analysis include ways to efficiently govern common pool resources; ways to efficiently provide public goods; oligopoly pricing decisions; coordination games; tactics in sports, and anti-submarine tactics.
Experimental
economics
involves the design of experiments using human subjects to support or refute
the predictive powers of economic models and theories. Experiments have also
been used to compare the behavior of economic decisions makers (subjects in an
experiment) to a game theoretic solution (i.e. the Nash Equilibrium). For
example, game theory indicates that the Nash Equilibrium solution to the
voluntary contribution public goods game with is for a player to “free-ride”,
thereby not contributing to the public good. Experimental economics allows
economists to determine if this equilibrium is consistent with human behavior.
Finally, economic experiments have also been designed to test the assumptions
of consumer and producer behavior in economic models. Students working in this
area will choose an economic model or game model and design an experiment using
midshipmen playing the roles of the economic agents. The results of the experiment will be
analyzed, usually by statistical methods, and compared with the results (or
hypotheses) predicted by the theoretic model.
In many cases the economic experiment will be a variation of an
experiment reported in the literature.
The
major focus of this seminar is your research paper. During the first six weeks you are to search
for a topic for your research paper. You
will do a literature search and perhaps a web search for papers using game
theory or reporting on economic experiments.
Reports of your literature search are required.
Research
papers focused on two-person games or military applications of game theory
should either analyze some variation of a game analysis presented in a journal
article or research report, or expand or create an example of the game model
that is present in a paper. In either case
the payoff matrix for an example of the game must be determined and its
mathematical solution must be found.
Research
papers focused on experimental methods must include: (1) a review of at least
one article dealing with the theory being investigated, (2) a review of at
least one article reporting on experiment investigating the same theory, (3) a
presentation of the experimental procedures used and the research hypotheses,
and (4) an analysis of the results of your experiment and how your experimental
results fit with those reported in the literature.
Students
will be assigned to one of the instructors as Project Advisor. The other
faculty member will be a Reader. When
working on the project the student must be in close contact with his or her
primary advisor. This includes
mandatory, weekly office visits to discuss progress on the project
The paper will start with
title page, which will include your name, the date, the course and an abstract,
which will be about half-a-page in length and single-spaced. The body of the paper will be divided into
sections and double-spaced. The body
should include a literature review with at least pertinent three articles from
quality journals, approved research reports or books, a description of the game
(either experimentally or theoretically), the results, and the conclusions.
Papers should include figures and tables where appropriate. These figures and
tables should be discussed in the paper and be able to “stand on their own” in
clarity (which implies a title is necessary). Results from SPSS, MATLAB, or
EXCEL should not merely be stapled to the back, but should be professionally
redone as a figure or table to support your results. Your paper’s target audience is your
classmates and future quantitative economic majors. The data used in most cases will be put into
an appendix; the paper may have several appendices.
There will be a section at the end of your paper listing references. Published material will be referenced following the style used in the American Economic Review or The Chicago Manual of Style. Reference to material to be found on the web should follow the following format:
Author (if known). title or short description, hyperlink address, organization sponsoring the material, the date it was lasted updated (if given) and the date you located it. For example:
Roth, Alvin
E. "Al Roth's game theory and experimental
economics page," http://www.economics.harvard.edu/~aroth/alroth.html,
Dept of Economics,
Twenty minutes will be allotted for each
presentation. All mathematics and
economic majors, and the faculties of the two departments will be invited to
attend. Except when answering questions
the blackboard will not be used.
Overhead slides or computer presentations are recommended. Students are strongly encouraged to make
several “dry runs” of their presentation.
Other students in the seminar will be expected to attend the
presentation and offer written comments; a form to be used for this purpose
will be provided.
·
Draft Project proposal (can be delivered by email) – 6 February.
·
Final Project proposal – 20 February.
·
Data collection complete – 25 March
·
1st draft of paper, which must include an abstract, an
introduction, a literature review, and experimental design (if an experimental
economics project is chosen) and an outline of unfinished parts of the paper – 3
April.
·
Project presentations – 8 April to 24 April.
·
Final written project report due 24 April.
Interim grades (6 and 12 week) are based on seminar participation, and short papers, and progress reports. Although the homework assignments and short papers will be graded, the grade received on these will affect the final grade only in borderline grades. The final course grade is driven primarily by the grade on the research paper and quality of the formal, oral presentation of the research paper.
WEEK ONE:
TU 1/7 An introduction
to game theoretic models.
TR 1/9 An
introduction to experimental economics.
Play several versions of the ultimatum game.
WEEK
TWO:
TU 1/14 Student
groups will discuss the consistency of the results in class play of ultimatum
game with the results reported in the Fehr et al article.
Reading
“The Economics of Fair Play,” Sigmund, Fehr, and Howak, Scientific
American, January 2002.
TR
1/16 Students will play several
versions of an auction game.
WEEK
THREE:
TU 1/21 Student
groups will discuss the consistency of the results of the auction game with
those predicted by microeconomic price theory.
In addition they will discuss the consistency of the result in class
play of auction game with results reported in the Smith and Williams article.
Reading
“Experimental Market Economics,”
TR 1/23 Experiment with a
public goods game followed by a discussion of ideas of course projects that
could be done in this area.
WEEK FOUR:
Tu
1/28 Review last year’s projects with the consumer game and
have the student groups present ideas for seller’s strategies. Have a discussion of ideas of course projects
that could be done in this area.
TR 1/30 Lecture on guidelines for the
running of an economic experiment.
Experimental Economics, 5(2), 2002, 91 – 110.
WEEK FIVE:
TU 2/4 No
class meeting. Students work on
developing ideas for their own project and searching the literature.
TR 2/6 No
class meeting. Students work on
developing ideas for their own project. By 1600 send an email to both
instructors proposing an area you want to develop for your course project. Your proposal must be longer than 200 words
and reference at least one article in the literature.
WEEK SIX:
TU 2/11 Meeting of groups of students working in similar areas. You will be notified by email of your group assignment and its meeting time.
TR 2/13 Present your project proposal orally (about a 5 minute presentation). The instructors will provide guideline on writing a research proposal, planning your project and a style guide for you paper
WEEK SEVEN:
TU 2/18 Meeting of groups of students
working in similar areas.
TR 2/20 Turn
in your written proposal. This report
will contain an outline of the issues to be studied, and the approach planned.