In his new book, Lecture Notes in Experimental Economics (World Scientific Publishing), UCI economics professor John Duffy explores the methodologies, applications and power of using controlled experiments to examine complex economic behaviors, taking on topics from game theory to public economics and auctions. Below, Duffy shares why experimental methods are an important tool for understanding economic principles and how emerging trends and technologies are allowing economists to boost real-world relevance of their results.

Q: Experimental economics relies heavily on controlled settings to study decision-making. How do you balance the need for simplicity in experimental design with the complexity of real-world economic behaviors?

A:  You're absolutely right—no controlled experiment can fully encapsulate the intricacies of the real world. What we aim to do is zero in on the core of a problem, boiling it down to the real trade-offs that people face. Take auctions, for example. The higher your bid, the better your chances of winning. However, bidding more also means you end up paying more compared to your valuation of the item. In the real world, it is hard to know a person's true valuation for an item, but in the lab, we can set a specific dollar value for an item. Then we can observe how much they bid in relation to this value.

Q: The book covers applications in areas like game theory, public economics, and auctions. Which of these areas do you feel has benefited the most from experimental approaches, and why?

A:  All of these areas and others have benefited from experimental economic methods. There are plenty of theories in economics that can be challenging to test in real-world settings due to the lack of available data. By using controlled experiments, researchers can create specific scenarios that allow them to collect data directly relevant to these theories. This approach not only enables tests of theories it also sheds light on their practical importance. Experimental methods are a truly valuable tool for understanding economic principles.

Q: The book is designed for students across various levels, from advanced undergraduates to Ph.D. candidates. What challenges did you face in ensuring the content was accessible to such a broad audience?

A:  The book presumes a basic knowledge of economics and game theory as providing that background would have made the book too long. But a wonderful thing about experiments is that the scenarios presented to subjects have to be simple enough to be quickly comprehended. As a result, students of all levels can understand the scenarios and insights that experimentalists are trying to evaluate.

Q: Experimental economics is a rapidly growing field. Are there any emerging trends or methodologies in the field that particularly excite you and are likely to shape its future?

A:  Absolutely, experimental economics is definitely buzzing with new ideas! One trend that I am particularly excited about is how the line between lab-based and field experiments is becoming increasingly fuzzy. I discuss this in the book. Traditionally, most experiments used undergraduates in controlled lab settings. But now, thanks to our connected, digital world, we can tap into platforms like Amazon's Mechanical Turk to run experiments remotely. Participants from all walks of life—different ages, income brackets, ethnicities and nationalities—can join in from their own devices. This shift not only diversifies our pool of subjects, it also boosts the real-world relevance of our results.