Development of Instrumentation for Institutional Process Design and Laboratory Testing in Economics and Political Science

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With National Science Foundation support, Dr. Charles Plott will purchase equipment to expand and develop his experimental economics laboratory. This includes 35 pentium 90 16MB, 500MBHD computers, monitors, high speed modems, workstations, a network server and related equipment. He will also hire computer programming staff to develop software which will be distributed to other institutions which teach economics and engage in experimental economics research. In this relatively new branch of economics, researchers create experimental markets in controlled laboratory conditions and allow subjects to participate in them. Money is used as an incentive to evoke responses that accompany meaningful decisions. As Dr. Plott notes, `The logic that supports the use of experimental methods in economics and political science is the same logic that supports the use of experimental methods in any branch of science. The trick is to identify and understand how the study of very simple and special cases can help when the real goal is to understand something that is vastly more complex.` This research, and the NSF grant which partially supports it, serves to accomplish several goals. First, it allows economists to evaluate the validity of widely held economic assumptions such as the laws of supply and demand. Secondly, it permits the application of experimental approaches to the solution of pressing present day problems. Dr. Plott and his group have, for example, conducted studies for the Department of Transportation and several other government agencies. They have provided guidance on issues such as the allocation of airport landing slots, regulation of the pollution permit market and the management of space station resources. Finally, this grant will allow the development of simulation and teaching software which can be used for both education and research.