The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Experimental Methods in Economics

  • C. F. Bastable
Reference work entry


In the mid-20th century economists became involved in the design and conduct of laboratory experiments to examine propositions implied by economic theory. This development brought new standards of rigour to the data gathering process. This article gives an account of the author’s experiment in 1956 to test the hypothesis that the competitive market process yields welfare improving (and, under certain limiting ideal conditions, welfare maximizing) outcomes, provides an interpretive history of the development of experimental economics, discusses the functions of market experiments in microeconomic analysis, and classifies the application of experimental methods.


Agenda processes Antitrust economics Auctions (theory) Buyer’s surplus Collusion Compensated unanimity processes Competitive equilibrium Contestable markets hypothesis Decentralization Demand Functions Dominance Double oral auction Expected utility theory Experimental methods in economics Hypotheses Incentive compatibility Industrial organization Institutions Labour supply Market as positive sum game Monopoly Monopsony Natural monopoly Non-satiation Parallelism Preference theory Privacy Public enforcement of law Public good allocation Research programmes Saliency Scale economics seller’s surplus Smith, A. Smith, V. L. Speculative gains Supply functions Testing Vickrey, W. Vouchers 

JEL Classifications

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • C. F. Bastable
    • 1
  1. 1.