The Use of Experimental Economics in Strategy Research

Abstract

Experimental methods in economics are well-suited for strategy research. The control of the laboratory allows researchers to decouple confounding influences of decision and environmental variables. We review the basic tenets of the methodology, and illustrate how economic experiments have examined strategic behavior in three .different settings: Markets, games, and decisions. In markets we discuss contestability, multiple point competition, and information-based fads (or "mirages”). In games we discuss coordination, reputation-building, and committee decision making. In decisions we discuss compensation contracts and tournaments.