Treating the Field As a Lab: a Basic Guide to Conducting Economic

Angelino C. G. Viceisza TREATING the FIELD as a LAB A Basic Guide to Conducting Economics Experiments for Policymaking ABOUT IFPRI The International Food Policy Research Institute (IFPRI®) was established in 1975 to identify and analyze alternative national and international strat- egies and policies for meeting food needs of the developing world on a sus- tainable basis, with particular emphasis on low-income countries and on the poorer groups in those countries. While the research effort is geared to the precise objective of contributing to the reduction of hunger and malnu- trition, the factors involved are many and wide-ranging, requiring analy- sis of underlying processes and extending beyond a narrowly defined food sector. The Institute’s research program reflects worldwide collaboration with governments and private and public institutions interested in increas- ing food production and improving the equity of its distribution. Research results are disseminated to policymakers, opinion formers, administrators, policy analysts, researchers, and others concerned with national and international food and agricultural policy. IFPRI is a member of the CGIAR Consortium. ABOUT IFPRI FOOD SECURITY IN PRACTICE The Food Security in Practice technical guide series is designed for development practitioners. The guides are meant to enrich the research skills of project personnel in the field. Each volume addresses informational and methodological issues that practitioners may confront during the life of a project, explaining relevant research and operational concepts in easy- to-understand ways. All manuscripts submitted for publication as IFPRI technical guides undergo an extensive review procedure that is managed by IFPRI’s Publications Review Committee (PRC). Upon submission to the PRC, the manuscript is reviewed by a PRC member. Once the manuscript is considered ready for external review, the PRC submits it to at least two external reviewers who are chosen for their familiarity with the subject matter and the country setting. Upon receipt of these blind external peer reviews, the PRC provides the author with an editorial decision and, when necessary, instructions for revision based on the external reviews. The PRC reassesses the revised manuscript and makes a recommendation regard- ing publication to the director general of IFPRI. With the director general’s approval, the manuscript enters the editorial and production phase to become an IFPRI technical guide. Treating the Field as a Lab A Basic Guide to Conducting Economics Experiments for Policymaking ANGELINO C. G. VICEISZA Copyright © 2012 International Food Policy Research Institute. All rights reserved. Contact [email protected] for permission to republish. International Food Policy Research Institute 2033 K Street, NW Washington, DC 20006-1002 Telephone +1-202-862-5600 www.ifpri.org DOI: http://dx.doi.org/10.2499/9780896297968 Library of Congress Cataloging-in-Publication Data Viceisza, Angelino C. G. Treating the field as a lab : a basic guide to conducting economics experiments for policymaking / Angelino C.G. Viceisza. p. cm. — (Food security in practice) Includes bibliographical references and index. ISBN 978-0-89629-796-8 (pbk. : alk. paper) — ISBN 0-89629-796-9 (pbk. : alk. paper) 1. Experimental economics. 2. Economics—Methodology. I. International Food Policy Research Institute. II. Title. III. Title: Basic guide to conducting economics experiments for policymaking. IV. Series: Food security in practice technical guide series. HB131.V53 2012 330.072—dc23 2012025532 Contents Figures and Boxes .................................. vii Acronyms and Abbreviations .......................... ix Foreword ........................................... xi Acknowledgments ..................................xiii Chapter 1 Introduction ........................................ 1 Chapter 2 How to Experiment .................................. 9 Basic Issues ....................................... 9 Experimental Design ............................. 14 Experiment Protocol: “It’s All About the Details” ..... 19 Implementation: “It’s All About the Details” (Continued) ..................................... 29 Other Practical Suggestions ........................ 50 Chapter 3 Examples of Experiments ............................ 55 Experiments and Behavioral Game Theory ........... 56 Ultimatum Games ............................... 59 Dictator Games .................................. 60 Trust Games .................................... 61 Cooperation Experiments: Public Goods Games ...... 63 Coordination Games ............................. 65 Market Experiments (Auctions) .................... 67 Risk- and Time-Preference Experiments ............. 70 Chapter 4 Inferences from Experiments ......................... 73 External and Internal Validity ...................... 74 Econometric References ........................... 76 Chapter 5 Conclusions ........................................ 79 References ......................................... 81 About the Author ................................... 87 Index .............................................. 89 v Figures and Boxes Figures 2.1 Experiment session in Ethiopia .............................. 43 2.2 Experiment session in Vietnam .............................. 44 Boxes 2.1 Principles for designing an experiment: Basic issues ............. 15 2.2 Principles for designing an experiment: Experimental design .... 20 2.3 Principles for designing an experiment: Experiment protocol ...................................... 29 2.4 Principles for designing an experiment: Implementation ........ 51 2.3 Principles for designing an experiment: Practical suggestions ....................................... 53 3.1 Some common experiment types ............................ 68 vii Acronyms and Abbreviations BGT behavioral game theory CITI Collaborative Institutional Training Initiative DA double auction DGP data-generating process E elastic ESA Economic Science Association I inelastic IFPRI International Food Policy Research Institute IMEEL IFPRI Mobile Experimental Economics Laboratory IRB institutional review board LAN local area network LSMS Living Standards Measurement Study NBER National Bureau of Economic Research NE Nash equilibrium PDA personal digital assistant PO posted offer PSU primary sampling unit RCT randomized controlled trial SEEDEC Symposium on Economic Experiments in Developing Countries SPNE subgame perfect Nash equilibrium SS sample size ix Foreword Conducting experiments has become a popular tool in economics research. Despite the growing use of the experimental approach, however, the methodology of experimentation has not found its way into the toolkit of the typical economist. In addition, while policymakers are often presented with the results of experimental work, they do not necessarily have the background to understand the rationale for conducting such experiments or an understanding of how the experiments can positively affect policy decisions. Treating the Field as a Lab: A Basic Guide to Conducting Economics Experiments for Policymaking offers economists, researchers, and policymakers 19 basic principles for conducting experiments in developing- country contexts. In this Food Security in Practice technical guide, Angelino Viceisza focuses on the class of economics experiments known as lablike field experiments and examines their basic rationale, the details involved in conducting them, and some of the applications of them in the literature. In addition, Viceisza discusses the role of game theory in conducting field experiments and considers some of the typical issues that can arise when drawing inferences and deriving policy implications from experimental work. Viceisza also suggests additional topics for future study. One such issue is which methodological difficulties experimenters face most often. For exam- ple, is a tendency among participants to alter their behavior because they know they are being studied a major problem? Alternatively, does the man- ner in which an experiment is framed affect the results? Another important issue for further exploration is the role lablike field experiments can play in future policymaking. Treating the Field as a Lab responds to a gap in the existing experimental literature by explaining how to conduct lablike field experiments and weighs the strengths and weaknesses of this innovative research method. Shenggen Fan Director General, International Food Policy Research Institute xi Acknowledgments I thank Tanguy Bernard, Gary Charness, Ruth Vargas Hill, Eduardo Maruyama, and Maximo Torero, as well as participants at several con- ferences, for the meaningful discussions that contributed to the ideas in this guide. My thanks also go to Gershon Feder, the Publications Review Committee of the International Food Policy Research Institute (IFPRI), and two anonymous reviewers for specific comments on how to improve the contents of the guide. I gratefully acknowledge the financial support of the IFPRI Mobile Experimental Economics Laboratory. xiii CHAPTER 1 Introduction he term experiment has become quite popular in economics. TExamples of experiments abound in the literature of many subfields of 1 economics, in particular experimental, behavioral, and development economics.1 Despite the growing use of the term experiment and of the experimental approach in economics, the methodology of experimentation has not yet found its way into the typical economist’s (and researcher’s)

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