Trading institutions are rarely discussed in the industrial organization literature. Nevertheless, empirical observations show that small change in the rules used to organize a market. These rules have significant effects on individual behavior and, eventually, on market efficiency. Market institutions matter because market rules determine the information structure of traders and influence individual incentives on a market. This finding has been fully established through experiments in the lab. Experimental economics applies laboratory methods of inquiry to the study of motivated human interactive decision behavior in social contexts governed by formal or informal rules. Experimental method allows a control of market rules, individual motivation and information. This method is appropriate and largely used to evaluate and compare market institutions and also to serve as a testing ground for new institutional design.
The workshop will give to participant a flavor of the methodology used to run a market experiment. After a brief introduction on the methodology itself, we will discuss some of the main findings of market experiments. We will organize two simple experiments during the workshop to confront the participants to experimental economics. The workshop will also review some research work using experimental economics as a test bed for new market institutions in some industries: electricity, transportation, telecommunication…