Computer Laboratory for Classroom and Research Experiments in Economics

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With National Science support Dr. Charles Holt will purchase equipment necessary to upgrade and expand the experimental economics laboratory at the University of Virginia. Instrumentation includes 20 Compaq Presario 3060 Pcs with 200 Mhz pentium MMX processors as well as etherlink adapters. These will be integrated into the current system. Experimental economists create simplified market situations in which variables can be manipulated and controlled and human subjects can compete for real financial award. This allows economics to introduce human factors including motivation and the need to act with imperfect information into both theoretical formulations and to actual market design. Such laboratory pretest, for example was employed in the design of the 1995 FCC auctions for personal communications services bandwidth. Results from experimental studies have shown that the behavior of financially motivated subjects is often systematically biased away from the predictions of standard game theory which assumes perfect rationality. Effective simulation requires the ability of large numbers of players to interact quickly and the proposed system will allow 20 participants to be experimentally linked. This will allow increased complexity in the experiments performed. Dr. Holt is actively involved in both undergraduate and graduate teaching and students will benefit significantly from the upgrade.