Examination Paper
Examination Session:
August
Year:
2023
Exam Code:
ECON43415-WE01

Title: Experimental Economics and Finance

Release Date/Time 8 August 2023: 09:30 hours (UK time)
Latest Submission Date/Time 9 August 2023: 09:30 hours (UK time)
Format of Exam Take home exam
Duration: 3 hours
Word/Page Limit: 3000 words
Additional Material provided: Relevant Papers
Expected form of Submission PDF of Legible Handwritten Work or Word Processor Document
Your uploaded file should be named with your anonymous ID
and the Exam Code e.g Z0123456ECON43415-WE01
Submission method Turnitin

Instructions to Candidates: This exam consists of three parts. Each part carries equal
marks and is equally weighted. Answer one of the two questions
in each of the first two parts and answer the sole question in the
last part.


Page 2 of 3 ECON43415-WE01

Section A

Answer one of the following two questions.
1. Consider the paper “The effect of group composition in a strategic environment: Evidence from a field
experiment,” by John List, William Neilson and Michael Price, published in the European Economic
Review (2016).
(i) Provide a complete description of the microeconomic systems, environment and institutions, that
are induced by the experimental design of the study. (30 marks)
(ii) Discuss the economic and social psychology models that form the basis of the conceptual model
used to analyse the research problem. (30 marks)
(iii) Describe how the experimental design allows for causal inference on how in-group bias affects
the propensity for collusion. Summarize the main results of the experiments. Discuss to what
extent the precept of parallelism is satisfied by this study, and what – if any – insights these
results provided to policy, regulation, or practice. (40 marks)

2. The papers "Incentives and behavior in English, Dutch and sealed-bid auctions," by Coppinger, Smith,
and Titus in Economic Inquiry (1980), and "Using field experiments to test equivalence between auction
formats: Magic on the lnternet," by Lucking-Reiley in the American Economic Review (1999), both
evaluate the Vickrey revenue equivalence theorem. The former uses a laboratory experiment and the
latter a field experiment.

(i) Critically discuss the differences in observability and control of the different elements of the
environment between the laboratory and field experimental tests. (40 marks)
(ii) Critically discuss advantages and disadvantages of laboratory versus field experiments in the
context of these two studies. (40 marks)
(iii) Critically discuss the differences in findings between these two studies and the implications
for our understanding of the economic performance and individual behaviour in alternative
auction formats. (20 marks)


Page 3 of 3 ECON43415-WE01

Section B
Please answer one of the following two questions
1. Consider the paper "Efficiency of experimental security markets with insider information: An
application of rational-expectations models." By Charles R. Plott and Shyam Sunder published in The
Journal of Political Economy (1982)
(i) Give the formulation of the typical market used in the study; including the characteristics of
traders, the structure of information. Then summarize the various competitive equilibrium
solution concepts for these markets and how they generate alternative hypothesises regarding
prices and allocations. (50 marks)
(ii) Discuss the major results of the experiment. Discuss to what extent these results confirm or
disprove alternative theories of competitive equilibrium. (50 marks)


2. Consider the paper "An experimental examination of two exchange institutions,” by Charles R. Plott and
Vernon L. Smith, published in The Review of Economic Studies (1978).
(i) Provide a complete description of the microeconomic systems, environment and institutions, that
are induced by the experimental design of the study. (50 marks)
(ii) Critically evaluate how well the experimental protocols satisfy the five precepts of experimental
design: nonsatiation, saliency, dominance, privacy, and parallelism. (50 marks)


Section C
Please answer the following question.
1. Consider the paper by Sutter, M.; Kocher, M.; Glätzle-Rützler, D., & Trautmann, S., 2013.
Impatience and uncertainty: experimental decisions predict adolescents’ field behavior.
American Economic Review, 103(1), 510-531.
(i) Critically discuss the experimental procedures and explain how the design allows one
to identify individual discount rates and risk aversion. (50 marks)
(ii) Summarize and critically discuss the main results from the experiments on individual
discount rates and risk aversion in the study. (50 marks)


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