Theory and experiment: What are the questions?

Theory and experiment: What are the questions?

  • Vernon L. SmithCorresponding author contact information, E-mail the corresponding author
  • ESI at Chapman University, One University Drive, Orange, CA 92866, United States


This paper deals generally with testing questions that arise both when experimental observations are in accord with the actions we predict, and when they are not. In both cases the inference of truth from observation is inherently ambiguous, and we face the daunting challenge of using our experimental skills and imagination to reduce this ambiguity. Primarily and most difficult of all we have to constantly reevaluate everything, including ourselves, especially in examining how we talk about and interpret our data. Although I will be drawing on examples and experience from laboratory experiments, the issues I consider apply just as meaningfully to other empirical studies whether from field experiments or observations from past records of socioeconomic processes.

JEL classification

  • B41;
  • C92


  • Experimental economics;
  • Game theory;
  • Methodology of science

Theory and experiment: What are the questions? 10.1016/j.jebo.2009.02.008 : Journal of Economic Behavior & Organization |


Managing self-confidence: theory and experimental evidence

Date: 2011
By: Markus Mobius
Muriel Niederle
Paul Niehaus
Tanya S. Rosenblat
Evidence from social psychology suggests that agents process information about their own ability in a biased manner. This evidence has motivated exciting research in behavioral economics, but also garnered critics who point out that it is potentially consistent with standard Bayesian updating. We implement a direct experimental test. We study a large sample of 656 undergraduate students, tracking the evolution of their beliefs about their own relative performance on an IQ test as they receive noisy feedback from a known data-generating process. Our design lets us repeatedly measure the complete relevant belief distribution incentive-compatibly. We find that subjects (1) place approximately full weight on their priors, but (2) are asymmetric, over-weighting positive feedback relative to negative, and (3) conservative, updating too little in response to both positive and negative signals. These biases are substantially less pronounced in a placebo experiment where ego is not at stake. We also find that (4) a substantial portion of subjects are averse to receiving information about their ability, and that (5) less confident subjects are more likely to be averse. We unify these phenomena by showing that they all arise naturally in a simple model of optimally biased Bayesian information processing.
Keywords: Human behavior ; Bayesian statistical decision theory