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Assessing the Predictive Power of Economic Experiments
This collection of problems and questions evaluates the understanding of predictive power in economic experiments, including its definition, limitations, and the factors that influence it. It covers topics such as the generalizability of lab findings, the distinction between internal and external validity, and the critiques raised by researchers like Levitt and List.
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Economics
Economy
The Economy 2.0 Microeconomics @ CORE Econ
CORE Econ
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Empirical Science
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Source Study: Falk & Heckman (2009) on Lab Experiments
Definition of Predictive Validity
Factors Affecting the Predictive Power of Economic Experiments
Internal vs. External Validity in Economic Experiments
Levitt and List (2007) on the Generalizability of Lab Experiments
Assessment Question: Levitt & List (2007) on Lab Experiment Generalizability
Assessing the Predictive Power of Economic Experiments
Source Study: Levitt & List (2007) on the Generalizability of Lab Experiments
Predictive Validity of a Cooperation Experiment with Brazilian Fishermen
Evaluating an Experiment on Charitable Giving
An economic experiment finds that university students, when given $20 in a controlled setting, donate an average of 35% to a designated charity. The researchers conclude that this finding likely predicts how much of their discretionary income young adults in the broader community will donate to charity. Which of the following factors poses the most significant threat to this conclusion's accuracy?
Applying Experimental Results to Policy
Two research teams design experiments to predict how farmers in a specific region will adopt a new, more expensive but drought-resistant seed.
- Team A recruits university students, provides them with a hypothetical budget, and asks them to choose between different seed options with varying costs and benefits presented on a computer screen.
- Team B recruits actual farmers from the target region, provides them with a real monetary budget, and has them make a binding choice to purchase either the traditional seed or the new seed for a small plot of their land.
Which team's experiment is likely to have greater predictive power for behavior in the target region, and why?
Evaluating the Real-World Relevance of a Laboratory Finding
An economic experiment that perfectly replicates a real-world market environment but uses a small, unrepresentative group of participants (e.g., only economics majors from one university) is likely to have high predictive power for the general population's behavior in that market.
Experimental Design Trade-offs for Prediction
Researchers conduct an experiment to understand how low-income families make grocery shopping decisions. They recruit undergraduate students from an elite university and give them a list of grocery items with prices. Participants are asked to select a week's worth of groceries for a hypothetical family of four while staying under a fictional budget of $100. The researchers aim to use these results to predict actual shopping patterns in nearby low-income communities. Which of the following modifications to the experimental design would most substantially improve its power to predict the real-world behavior of the target group?
Researchers conduct a laboratory experiment where pairs of anonymous university students play a game. Player 1 is given $10 and can send any portion of it to Player 2. The amount sent is tripled. Player 2 can then return any portion of the tripled amount to Player 1. The results are intended to measure trust and reciprocity. For which of the following real-world situations would the experimental results have the greatest predictive power?
Evaluating an Experiment on Consumer Pricing
Predictive Validity of a Cooperation Experiment with Brazilian Fishermen
Learn After
A researcher conducts a controlled experiment and finds that participants are significantly more likely to contribute to a group fund when their individual contributions are made public to the other participants. Based on the principle that behavior in such controlled settings can forecast actions in naturally occurring situations, which of the following is the most valid inference?
Evaluating the Predictive Power of Economic Experiments
The primary value of controlled economic experiments lies in their ability to establish theoretical principles, but their findings are generally considered to have little to no predictive power for behavior in real-world situations.
Match each finding from a controlled economic experiment with the real-world behavior it most likely predicts, demonstrating the predictive power of such experiments.
An economist is designing a controlled experiment to understand how social pressure influences charitable donations. Which of the following design choices would most likely increase the experiment's predictive power for forecasting donation behavior in naturally occurring situations?
Evaluating the Predictive Power of a Lab Experiment
Significance of Predictive Power in Economic Experiments
Limitations of Predictive Power in an Experimental Design
A technology firm conducts a controlled experiment with a group of newly hired interns to test a new performance-based bonus system. In the experiment, the interns who receive the new bonus are 25% more productive on a data-entry task than those who do not. The firm's management concludes that implementing this bonus system company-wide for all employees will result in a 25% increase in overall productivity. Which of the following statements represents the most critical evaluation of this conclusion's reliance on the experiment's predictive power?
A city council wants to forecast how a new 'congestion charge' (a fee for driving downtown during peak hours) will affect traffic. They are considering several experimental designs to test the policy before a full-scale implementation. Which of the following designs is likely to have the highest predictive power for how the general population of drivers will behave?