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Economics is enjoying a resurgence of interest in behavioral considerations, i.e. in the study of how people actually make decisions. Laboratory experiments are increasingly used to study behavior in markets, games, and other strategic situations. The rising interest in experiments is reflected in the 2002 Nobel Prize, which went to an experimental economist and an experimental psychologist. Whole new sub-disciplines are arising in the literature (e.g., behavioral game theory, behavioral law and economics, behavioral finance, neuro-economics), and experiments provide key empirical guideposts for developments in these areas.
This book is designed to combine a behavioral approach with active classroom learning exercises. This book is a collection of chapters, each containing a single game and the associated analysis of the results. The games set up simple economic situations, e.g. a market or auction, which highlight several related economic ideas. Each chapter provides the reading for a particular class, in a one-a-day approach. The reading can serve either as a supplement to other material, or (preferably) it can be assigned in conjunction with an in-class experiment in which students play the game with each other. Doing the experiments before the assigned reading enhances the teaching value of these experiments. Many of the games can be run in class by hand, with dice or playing cards. The appendix contains instructions for hand-run games in many cases.