FEELE Lab Finance and Economic Experimental Laboratory at Exeter

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FEELE LabFinance and Economic Experimental
Laboratory at Exeter

• Todd Kaplan
• Dieter Balkenborg
• Tim Miller

FDTL5 Grant for Bringing Experimental Economics
into the Classroom
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Bringing Economic Experiments into the Classroom
Objective Put experiments into the undergraduate
economics curriculum at the University of Exeter.
Thanks to
Higher Education Academy in England for the s.
Economics Network (England)
Dept. of Economics at Exeter.
Steve Gjerstad, Denise Hazlett, Charlie Holt
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Why use classroom experiments?

• Inspires students.
• Chamberlin 1948 ran a simple market experiment.
• This inspired Vernon Smith to go into
  experimental economics.
• Todd Kaplan was a student at Caltech 20 years
  ago. Experiments with Charlie Plott inspired him
  to switch majors to econ.
• Memorable experience for students.
• Brings students closer to research. Allows
  research to help teaching and teaching to help
  research.
• We have embedded 48 experiments into 18
  undergraduate modules at Exeter.

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Types of Classroom Experiments

• HandRun.
• Quick raise hands (symmetric prisoners dilemma).
• Sampling paper collection (22 games, currency
  attack).
• More sophisticated (Pit market, Slomans Trade
  Game).
• Computerized.
• Web based PHP or Java (Bertrand, Double
  Auction).
• Locally based/installed (z-tree).
• Homework.
• Simple QA with feedback in class (Rubinsteins
  site).
• More advanced Individual Choice experiments with
  some immediate feedback (Monty Hall).
• Play against a fictitious/robot/prior human
  player (Holt Travelers dilemma).
• Students play each other at designated time.
• Research.
• Single lecture (Chamberlain)
• Complete semester (Selten/Mitzkewitz/Uhlich, Iowa
  Pol. Stock Market)
• Requirement to be a subject. (Psychology)

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Hand run

• Advantages
• Suitable for large lectures.
• Some take just minutes.
• Engaging for students .
• Disadvantages
• May require careful preparation, including room
  structure.
• May require assistants/volunteers.
• May require lecturer w/ practice Student
  experience may vary.
• Data collection/entry takes time. Feedback may be
  delayed. (the next lecture)
• One can only run for few rounds.
• Some students may not be participating.

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Handrun Hints

• Techniques for low setup costs.
• At beginning of semester, cut simple strips of
  paper (you may want to use two colours).
• Bring several plastic bags from home to collect
  answers.
• Give verbal instructions/ display question.
• Quick to collect and sample a few.
• Display last years results.
• Know what you are doing beforehand, particularly
  with assistants.
• Example Guessing game.
• Guess a number 0 to 100.
• The guess closest to 2/3 the average number wins
  a prize.
• Ties will be broken randomly.

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Graph of guesses (Exeter UGs)
Average was 36.7 (winning guess 24.5),
equilibrium is 0!
Six guesses were above 66.66
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Exeter UG 2nd round guesses
Average was 12.4 (winning guess 8.3)
Todds quote you shouldnt ignore theory, even
when it is wrong.
One guess was above 66.66
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Computerized

• Advantages
• Readily available, great for beginners, uniform
  experience.
• Immediate results, data ready for evaluation
• Disadvantages
• Experiments standardized, limited flexibility
• Room requirements, split large lectures, use
  tutorials
• May need trained teaching assistant
• Equipment (PhP vs Java, handhelds)
• Needs one hour of teaching time

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Computer Experiment Hints

• Try using two students per computer (cuts down on
  web surfing, email browsing and gossip).
• Give instructions beforehand (helps foreign
  dyslexic students).
• Let students play all treatments in easiest
  order. (within subject treatments)
• Example Bertrand Competition.
• Students act as firms in a market.
• They choose prices each period.
• Customers go to the firm with the lowest price.

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Sample result Bertrand Game
Two Firms Fixed Partners
Five Firms Random Partners
Two Firms Random Partners
I learnt that collusion can take place in a
competitive market even without any actual
meeting taking place between the two parties.
Some people are undercutting bastards!!!
Seriously though, it was interesting to see how
the theory is shown in practise.
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Homework

• Advantages
• Saves lecture time
• Less hassle
• Many periods possible (no time limit)
• Easy access to homework data
• Disadvantages
• Typically not interactive
• Participation rate can be low unless incentives
  are in place.
• Hint use some sort of incentive.

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Research

• Advantages
• RESEARCH
• Low cost (saves recruitment costs).
• Disadvantages
• Organization needs to be more careful than
  standard teaching experiments.
• Limited communication between and to students.

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Challenges for Classroom Experiments

• Students
• Lecturers
• Module (Course) Structure

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Challenges

• Students
• They have limited time too (both inside and
  outside the classroom).
• Maintain attention (negative externality of both
  data and speed).
• Assess performance/motivation (earnings is noisy,
  attendance has problems).
• How can we write test (or homework) questions
  that require student to attend experiment?
• Some may (correctly/incorrectly) resent being
  used for research experiments at a sacrifice of
  their studies.

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Challenges

• Lecturers
• 4 types Eager, Interested but need support,
  hesitant, unwilling.
• Need to want to try something new.
• Need to sacrifice course time.
• Need to think experiments are of value.

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Challenges

• Classes
• Many courses dont have experiments that fit
  directly into them (macro / finance).
• Same experiments for different courses (avoid
  repeat).
• Some experiments may require students to be in
  two courses. (Run an experiment in micro
  economics and analyze it for the statistics
  course.)

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Rewards

• Students
• Enjoyable, Interactive
• Better grades (Emerson Taylor, 2004)
• Concrete learning experience (rather than
  abstract/mathematical formulas).
• Some students do well in experiments but poor on
  tests (such as those with poor math skills).
• Lecturers
• Richer teaching style -gt evaluations
• Promote experimental economics (preach what we
  practice).

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How to use experiments

• Size can determine how
• Large lectures (gt100) use short hand-run,
  homework
• Medium Lectures (40ltlt100) make use of
  computerized experiments in tutorials.
• Small Lectures (lt40). Possible to use
  computerized experiments in place of lectures
• Experiments seem to work well for all levels of
  students (even high school)
• Hints
• Usually do experiments before covering the
  material in the course.
• Let students participate in preparation,
  execution and evaluation. (Especially in an
  experimental class.)
• Relate some exam questions to experiments.
• Dont be too obsessed with preserving a research
  environment.

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Exeter Games

• On purpose same style as Veconlab (Holt).
• Goal is to complement selection of experiments.
• 14 computerized experiments.
• Types are a mix of individual choice (homework)
  and interactive games.

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Exeter Games Experiments

1. Bertrand Market (micro / IO)
2. Call Option (finance, homework)
3. Currency attack (macro)
4. Diamond Dybvig bank run (macro /banking)
5. Insurance (economics of social policy, micro)
6. Holdup Problem (corporate finance)
7. Kiotaki Wright fiat money (macro /banking)
8. Lemon Game (micro / IO, homework)
9. Monty Hall (statistics, homework)
10. Network Externalities (micro / IO)
11. Price Discrimination (micro, homework)
12. Team Draft (game theory)
13. Warren Buffet investment (finance)
14. Introductory Statistics (statistics)

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How to find Exeter Games

• Google for Feele to find the FEELE Laboratory
  homepage.
• Ignore the large link Register here, which is
  for subjects to register for one of our research
  experiments.
• Instead scroll down to Access our website of
  teaching experiments.
• View list of experiments (short descriptions of
  each)
• Experimenter access (soon to be you!)
• Participant access (your students use this to log
  in you use it to check that your experiment is
  set up correctly)

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Brief descriptions of each of our experiments.
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Click here to register as an experimenter and run
your first experiment.
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Start by registering your email address.
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The Code Word is deadsea.
Username will be based on your initials.
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Check your details and confirm.
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Username and Password will be emailed to you,
after which you can log in here.
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Enter details from registration email and click
here.
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Click here to create your first experiment.
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Choose a code word to allow students to log in to
your experiment.
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Your students will need to know this Access Code
to be able to log in to your experiment.
Click here to configure, run and monitor your new
experiment.
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The new experiment is empty and you have to add
the first session.
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Click here to makes changes to the default
configuration.
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Enter the number of students in your class
(default 2).
Enter the number of rounds you want to run
(default 1).
Save your changes.
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Useful feature you can view the effects of your
configuration changes on the subject instructions
by clicking here.
Dont forget you must start the experiment
before the first subject can log in!
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Click here to monitor subjects as they log in and
view the results of the experiment.
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Open a NEW browser window (not a tab), locate the
FEELE homepage and click here to log in as a test
subject in your new experiment.
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Your students will log in here.
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Consists of your Username (tk2), a hyphen (-) and
whatever code word you chose when you created
your experiment (network).
The student enters his/her names here. (Note
you may enter test to suppress the display of
subject instructions during testing.)
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The student checks his/her details and confirms.
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You now need to open a further 5 NEW browser
windows (not tabs) and log in the remaining test
subjects.
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This is what a typical result set looks like.
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Draws graph of results.
Exports results to Excel (space delimited).
Breakdown of test question responses.
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Reminder of your configuration settings.
Reminder of subject instructions.
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Subjects often want to know who won!
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How to find our Wikiversity site

• Google for Feele to find the FEELE Laboratory
  homepage.
• Scroll down to Wikiversity Site for Economic
  Classroom Experiments and click on View
  Wikiversity Site.

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On our Wikiversity site

• Why use experiments in teaching economics
• List of Experiments
• Hand-run as well as computerized
• Not just Exeter Games
• Courses
• Hints for running economic classroom experiments
• Useful Links and Related Literature
• Links to popular Veconlab (Holt) and Econport
  sites.

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Quick link to Wikiversity.
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Links to other experiment sites here.
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Quick link to Wikiversity.
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Resources

• Web based resources.
• Veconlab (Holt)
• Exeter Games
• Econport (Cox, Gjerstad)
• Game Theory website (Rubinstein)
• Denise Hazletts website
• Experonomics