Vernon L. Smith

REFLECTIONS ON HUMAN ACTION AFTER 50 YEARS (2008)

Vernon L. Smith

The core of Ludwig von Mises ’ thought is the theory of human action, or praxeology, the general science he seeks to articulate. Within this general science is included—embedded in...

Economics - The promise of prediction markets (2008)

Arrow, Kenneth J., Forsythe, Robert, Gorham, Michael, Hahn, Robert, Hanson, Robin, Ledyard, John O., ...

The ability of groups of people to make predictions is a potent research tool that should be freed of unnecessary government restrictions.

Concurrent Trading in Two Experimental Markets with Demand Interdependence (2007)

Arlington W. Williams, Vernon L. Smith, John O. Ledyard

Summary. We report results from fteen computerized double auctions with concurrent trading of two commodities. In contrast to prior experimental markets, buyers ' demands are induced via CES...

Correspondence regarding this manuscript should be sent to: (2007)

Kevin Mccabe, Vernon L. Smith, Bart J. Wilson, Robert Kurzban, Robert Kurzban

Real Time Public Goods 2 Allowing players in public goods games to make small incremental commitments to contributing to the good might facilitate cooperation because it helps to prevent players from...

Concurrent Trading in Two Experimental Markets with Demand Interdependence (2007)

Arlington W. Williams, Vernon L. Smith, John O. Ledyard

Summary. We report results from fteen computerized double auctions with concurrent trading of two commodities. In contrast to prior experimental markets, buyers ' demands are induced via CES...

Racionalidad constructivista y ecológica en economía: discurso pronunciado en el acto de entrega del premio Nobel de Economía 2002 (2005)

Smith, Vernon L.

El hilo conductor de este artículo es el principio de la existencia simultánea de dos órdenes racionales (racionalidad constructivista y racionalidad ecológica). Intentaré argumentar que ambos...

The endowment effect (2003)

Kujal, Praveen, Smith, Vernon L.

The divergence between the willingness-to-pay (WTP) and willingness-to-accept (WTA) has resulted in two explanations. First, that this may be due to the manifestation of the endowment effect...

Fairness and short run price adjustment in posted offer markets (2003)

Kujal, Praveen, Smith, Vernon L.

Questionnaire studies show that perceptions of fairness cause people to resist price increases following abrupt changes in conditions with no cost justification. We examine this hypothesis in...

Fairness and short run price adjustment in posted offer markets (2003)

Kujal, Praveen, Smith, Vernon L.

Questionnaire studies show that perceptions of fairness cause people to resist price increases following abrupt changes in conditions with no cost justification. We examine this hypothesis in...

The endowment effect (2003)

Kujal, Praveen, Smith, Vernon L.

The divergence between the willingness-to-pay (WTP) and willingness-to-accept (WTA) has resulted in two explanations. First, that this may be due to the manifestation of the endowment effect...

Constructivist and ecological rationality in economics (2003)

Vernon L. Smith, Professor Of Economics

When we leave our closet, and engage in the common affairs of life, (reason’s) conclusions seem to vanish, like the phantoms of the night on the appearance of the morning; and ‘tis difficult for...

by (2002)

Vernon L. Smith

When we leave our closet, and engage in the common affairs of life, (reason’s) conclusions seem to vanish, like the phantoms of the night on the appearance of the morning; and ‘tis difficult for...

Using experiments to inform the privatization/deregulation movement in electricity (2002)

Stephen J. Rassenti, Vernon L. Smith, Bart J. Wilson

known as e-commerce) in the experimental laboratory began in 1976 when Arlington Williams conducted the initial experiments testing the first electronic “double-auction ” trading system, which he...

Using Experiments to Inform the Privatization/Deregulation Movement in Electricity (2002)

Stephen Rassenti Vernon, Vernon L. Smith, Bart J. Wilson

this paper is based: the Arizona Corporation Commission (Commissioners: Richard Kimball, Junius Hoffman, and Marianne Jennings) who in 1984 had the vision to fund our first efforts to study...

Structural Features that Contribute to Market Power (2000)

Stephen J. Rassenti, Vernon L. Smith, Bart J. Wilson

In this paper we report an experiment that examines a primary concern of policy makers: how a structural feature of electric power networks can contribute to the exercise of market power by...

Overreactions, Momentum, Liquidity, and Price Bubbles in Laboratory and Field Asset Markets (2000)

Gunduz Caginalp, David Porter, Vernon L. Smith

Laboratory asset markets provide an experimental setting in which to observe investor behavior. Over more than a decade, numerous studies have found that participants in laboratory experiments...

BEHAVIORAL FOUNDATIONS OF RECIPROCITY: EXPERIMENTAL ECONOMICS AND EVOLUTIONARY PSYCHOLOGY (1998)

HOFFMAN, ELIZABETH, MCCABE, KEVIN A., SMITH, VERNON L.

Laboratory experiments have generally supported the theorem that, in classical property rights environments, noncooperative behavior in markets yields efficient social outcomes. Experiments, however,...

Experimental tests of the endowment effect (1994)

Franciosi, Robert, Kujal, Praveen, Michelitsch, Roland, Smith, Vernon L.

The discrepancy between WTA and WTP is supposed to be a manifestation of the endowment effect (KKT). The discrepancy between the average WTA-WTP disappears in the sense of statistical significance...

Economics in the Laboratory (1994)

Vernon L. Smith

Why do economists conduct experiments? To answer that question, it is first necessary briefly to specify the ingredients of an experiment. Every laboratory experiment is defined by an environment,...

REWARDS, EXPERIENCE AND DECISION COSTS IN FIRST PRICE AUCTIONS (1993)

SMITH, VERNON L., WALKER, JAMES M.

Consistent with a model of asymmetric risk aversion, subjects in first price auctions consistently bid above the risk neutral Nash prediction. It has been argued that this is due to low opportunity...

MONETARY REWARDS AND DECISION COST IN EXPERIMENTAL ECONOMICS (1993)

SMITH, VERNON L., WALKER, JAMES M.

A surtey of thirty-one experimental studies whith report data on the comparative effects of monetary rewards and opportunity cost shows: (1) several studies in whith increased rewards shift the...

ECONOMIC PRINCIPLES IN THE EMERGENCE OF HUMANKIND-PRESIDENTIAL ADDRESS TO THE WESTERN ECONOMIC ASSOCIATION, JUNE 30, 1991 (1992)

SMITH, VERNON L.

Using an overlapping-generations model in which households may have either finite or infinite horizons, I derive the implications of each horizon for the steady-state real interest rate. I then...

ELECTRIC POWER DEREGULATION: BACKGROUND AND PROSPECTS (1988)

SMITH, VERNON L.

The incentive failures of rate-of-return regulation are well known and thus raise the question of whether to deregulate electric power. The development of long-distance transmission and of...

INCENTIVES AND BEHAVIOR IN ENGLISH, DUTCH AND SEALED-BID AUCTIONS (1980)

COPPINGER, VICKI M., SMITH, VERNON L., TITUS, JON A.

The Pareto optimality and Price behavior of English and Dutch oral auctions, and First-Price and Second-Price sealed-bid auctions are compared under various procedures for assigning valuations among...

A comparison of naïve and sophisticated subject behavior with game theoretic predictions

McCabe, Kevin A., Smith, Vernon L.

We use an extensive form two-person game as the basis for two experiments designed to compare the behavior of two groups of subjects with each other and with the subgame perfect theoretical...

Intentionality detection and “mindreading”: Why does game form matter?

McCabe, Kevin A., Smith, Vernon L., LePore, Michael

By around the age of 4 years, children “can work out what people might know, think or believe” based on what they say or do. This is called “mindreading,” which builds upon the human ability...

Controlling market power and price spikes in electricity networks: Demand-side bidding

Rassenti, Stephen J., Smith, Vernon L., Wilson, Bart J.

In this article we report an experiment that examines how demand-side bidding can discipline generators in a market for electric power. First we develop a treatment without demand-side bidding; two...

A comparison of naïve and sophisticated subject behavior with game theoretic predictions

McCabe, Kevin A., Smith, Vernon L.

We use an extensive form two-person game as the basis for two experiments designed to compare the behavior of two groups of subjects with each other and with the subgame perfect theoretical...

Intentionality detection and “mindreading”: Why does game form matter?

McCabe, Kevin A., Smith, Vernon L., LePore, Michael

By around the age of 4 years, children “can work out what people might know, think or believe” based on what they say or do. This is called “mindreading,” which builds upon the human ability...

Controlling market power and price spikes in electricity networks: Demand-side bidding

Rassenti, Stephen J., Smith, Vernon L., Wilson, Bart J.

In this article we report an experiment that examines how demand-side bidding can discipline generators in a market for electric power. First we develop a treatment without demand-side bidding; two...

Sustaining Cooperation in Trust Games

Mary L. Rigdon, Kevin A. McCabe, Vernon L. Smith

It is well known in evolutionary game theory that population clustering in Prisoner's Dilemma games allows some cooperative strategies to invade populations of stable defecting strategies. We adapt...

A compensation election for binary social choice

Oprea, Ryan D., Smith, Vernon L., Winn, Abel M.

We report experimental results examining the properties of a bidding mechanism, the “Compensation Election,” which is designed to implement a simple binary choice between two options. We may...

Economics in the Laboratory.

Smith, Vernon L

The questions addressed in this paper include: What is a laboratory experiment? What are the reasons why economists conduct such experiments? What have we learned? Among the many findings of...

THE ENDOWMENT EFFECT

Praveen Kujal, Vernon L. Smith

The divergence between the willingness-to-pay (WTP) and willingness-to-accept (WTA) has resulted in two explanations. First, that this may be due to the manifestation of the endowment effect...

FAIRNESS AND SHORT RUN PRICE ADJUSTMENT IN POSTED OFFER MARKETS

Praveen Kujal, Vernon L. Smith

Questionnaire studies show that perceptions of fairness cause people to resist price increases following abrupt changes in conditions with no cost justification. We examine this hypothesis in...

Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets.

Smith, Vernon L, Suchanek, Gerry L, Williams, Arlington W

Spot asset trading is studied where the only external source of value is an independent draw from a common information dividend distribution at the end of each of fifteen trading periods. Fourteen of...

Exclusionary Bundling and the Effects of a Competitive Fringe

Anil Caliskan, David Porter, Stephen Rassenti, Vernon L. Smith, Bart J. Wilson

The traditional analysis of exclusionary bundling examines the impact of a monopolist bundling product A with another product B, which is competitively provided. Using experimental posted-offer...

Theory and Individual Behavior of First-Price Auctions.

Cox, James C, Smith, Vernon L, Walker, James M

First-price auction theory is extended to the case of heterogeneous bidders characterized by M-parameter log-concave utility functions. This model, and its specific two-parameter constant relative...

Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels.

Rassenti, Stephen J, Smith, Vernon L, Wilson, Bart J

A "pay-as-offered" or discriminatory price auction (DPA) has been proposed to solve the problem of inflated and volatile wholesale electricity prices. Using the experimental method we compare the DPA...

Market Contestability in the Presence of Sunk (Entry) Costs

Don Coursey, R. Mark Isaac, Margaret Luke, Vernon L. Smith

This article extends previous laboratory experimental research to examine the competitive discipline of contested markets with a "natural monopoly"-type cost structure where sunk costs are neither...

Interview with the 2002 Laureates in Economics, Daniel Kahneman and Vernon L. Smith

Kahneman, Daniel, Smith, Vernon L.

Interview with the 2002 Laureates in Economics, Daniel Kahneman and Vernon L. Smith, December 12, 2002. Interviewers are Professor Karl-Gustaf Loefgren and Dr Anne-Sophie Crepin.

Autobiography

Smith, Vernon L.

I was born Vernon Lomax Smith in Wichita, on the flat plains of Kansas, January 1, 1927 in the years leading to the Great Depression. Like many of my generation I am a product of the strange...

Constructivist and Ecological Rationality in Economics

Smith, Vernon L.

When we leave our closet, and engage in the common affairs of life, (reason's) conclusions seem to vanish, like the phantoms of the night on the appearance of the morning; and 'tis difficult for us...

symposium articles : Concurrent trading in two experimental markets with demand interdependence

Arlington W. Williams, John O. Ledyard, Steven Gjerstad, Vernon L. Smith

We report results from fifteen computerized double auctions with concurrent trading of two commodities. In contrast to prior experimental markets, buyers' demands are induced via CES earnings...

symposium articles : Dividend timing and behavior in laboratory asset markets

Mark Van Boening, Vernon L. Smith, Charissa P. Wellford

This paper investigates the effect of dividend timing on price bubbles and endogenous expectations in twenty-six laboratory asset markets. In ten "A1" markets, a single dividend is paid at the end of...

Behavioral Foundations of Reciprocity: Experimental Economics and Evolutionary Psychology.

Hoffman, Elizabeth, McCabe, Kevin A, Smith, Vernon L

Laboratory experiments have generally supported the theorem that, in classical property rights environments, noncooperative behavior in markets yields efficient social outcomes. Experiments, however,...

Rewards, Experience and Decision Costs in First Price Auctions.

Smith, Vernon L, Walker, James M

Consistent with a model of asymmetric risk aversion, subjects in first price auctions consistently bid above the risk neu tral Nash prediction. It has been argued that this is due to low opportun ity...

Monetary Rewards and Decision Cost in Experimental Economics.

Smith, Vernon L, Walker, James M

A survey of thirty-one experimental studies that report data on the comparative effects of monetary rewards and opportunity cost shows (1) several studies in which increased reward s shift the...

Thar She Blows: Can Bubbles Be Rekindled with Experienced Subjects?

Reshmaan N. Hussam, David Porter, Vernon L. Smith

We report 28 new experiment sessions consisting of up to three experience levels to examine the robustness of learning and "error" elimination among participants in a laboratory asset market and its...

Historical Property Rights, Sociality, and the Emergence of Impersonal Exchange in Long-Distance Trade

Erik O. Kimbrough, Vernon L. Smith, Bart J. Wilson

This laboratory experiment explores the extent to which impersonal exchange emerges from personal exchange with opportunities for long-distance trade. We design a three-commodity production and...

Futures Contracting and Dividend Uncertainty in Experimental Asset Markets.

Porter, David P, Smith, Vernon L

Prices in experimental asset markets tend to bubble and then crash to dividend value at the end of the asset's useful life. Explanations for this phenomenon are (1) that participants cannot form...

Rational Choice: The Contrast between Economics and Psychology.

Smith, Vernon L

Rational Choice--the published record of a conference on economics and psychology--frames the issues as a contest between economic theory and the falsifying evidence from psychology. According to a...

INCORPORATING INSTREAM FLOW VALUES INTO A WATER MARKET

Murphy, James J., Dinar, Ariel, Howitt, Richard E., Rassenti, Stephen J., Smith, Vernon L., Weinberg, Marca

We use laboratory experiments to test three different water market institutions designed to incorporate instream flow values into the allocation. The institutions are (1) a baseline with fixed...

MECHANISMS FOR ADDRESSING THIRD PARTY IMPACTS RESULTING FROM VOLUNTARY WATER TRANSFERS

Murphy, James J., Dinar, Ariel, Howitt, Richard E., Mastrangelo, Erin, Rassenti, Stephen J., Smith, Vernon L.

This paper uses laboratory experiments to test alternative water market institutions designed to protect third party interests. The institutions tested include taxing mechanisms that raise revenue to...

Differences in the Economic Decisions of Men and Women: Experimental Evidence

Eckel, Catherine C., Grossman, Philip J., Charles R. Plott, Vernon L. Smith

This chapter reviews the results from public goods, ultimatum, and dictator experiments for evidence of systematic differences in the behavior of men and women. While the results do not offer...

The Two Faces of Adam Smith

Vernon L. Smith

Adam Smith’s two major works are based on apparently contradictory themes in human nature: noncooperative self-interest and other-regarding sympathy. These views are not contradictory if we...

ELECTRIC POWER DEREGULATION: BACKGROUND AND PROSPECTS

VERNON L. SMITH

The incentive failures of rate-of-return regulation are well known and thus raise the question of whether to deregulate electric power. The development of long-distance transmission and of...