Encouraging Scientific Inquiry Through Experimental Lab
Reports: An Example of Conducting Experimental Auctions
to Demonstrate WTP/WTA Disparity
Hillary M. Sackett, Ph.D.
Westfield State University
Prepared for The 9th Annual Economics Teaching Conference
October 24 – 25 Austin, TX
Outline
• Background
– Course Design
– Classroom Experiments
• Two-week Module Simulation
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Class 1: Lecture
Class 2: Problem Solving
Class 3: Classroom Experiment
Class 4: Discussion
• Assessment
– Experimental Lab Reports
– Rubric
– Student Evaluations
Course Design
• ECON 320: Environmental Economics
• Objectives: Students will be able to…
1) Communicate, verbally and in writing, how social science
knowledge is established and how this knowledge
changes over time.
2) Evaluate evidence and apply it to solving problems using
the scientific method.
3) Analyze data and construct theoretical and mathematical
models of observed economics behavior.
4) Engage in interdisciplinary discussion of past, present,
and future economic policies and their local and global
impact.
Course Design
• Module Composition
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Class 1: Lecture
Class 2: Problem Solving
Class 3: Classroom Experiment
Class 4: Discussion
• Course Evaluation
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Experimental Lab Reports (5)= 30%
Exam 1 = 20%
Exam 2 = 20%
Problem Sets (5) = 20%
Film Reviews (2) = 10%
Course Design
• Thematic two-week modules:
– Externalities & Public Goods
– Efficiency and Open Access
– Valuing Environmental Benefits and Costs
– Monitoring and Enforcement
– Incentive-based Policy and Pollution Trading
Classroom Experiments
“Learning is too often passive in economics,
with a vast difference between abstract (yet
powerful) theoretical models and the busy
nature of everyday economic activity”
- Charles Holt
Classroom experiments enhance the effectiveness of
the Socratic method, by exposing students directly to
the economic environments they study.
Class 1: Lecture
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Efficiency Standard
– Maximize Net Benefits
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Two categories of Benefits
– Market Benefits
– Non-market Benefits = Use + Option + Existence Value
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Consumer Surplus
– Welfare Analysis
– WTP for Improvement vs. WTA for Compensation
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WTP/WTA Disparity
– Prospect Theory
– Substitution
– WTA >WTP – standard practice to use WTP
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Non-market Valuation Methods
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Contingent Valuation
Travel Cost
Hedonic Analysis
Experimental Auctions
Class 2: Problem Solving*
• In-class activity
• Group Work
• Professor available for questions
*Handout # 1
Class 3: Classroom Experiment:
Handouts
• Handout # 2:
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Participation Agreement
Auction Instructions
How Does the Auction Work?
Discussion Questions
• Handout # 3:
– Bid Sheets
Let the Auction Begin!
Product 1: Walmart Great Value
Maple Syrup
Product 2: Natural Homegrown
Michigan Maple Syrup
Classroom Experiment:
Step-by-Step
• Step 1: Choose two products that are quality
differentiated
– Students are like puppies – very food motivated!
• Step 2: Run WTP auctions for each product
• Step 3: Endow students with “superior”
product (Do not tell them ahead of time!)
• Step 4: Run WTA auctions for product
Classroom Experiment:
Design Elements
• Multiple Rounds
– More than one round for each auction allows for learning
• Bid Explanation
– Richer data on motivation for bids
• Posted Bids
– Feedback encourages bids to converge
• Information Treatment
– Break class into groups to test effect of information
• Total WTP vs. WTP for upgrade
– Endow students with one product and have them bid WTP
to upgrade or WTA to downgrade
Class 4: Discussion
• WTP Natural – WTP Conventional
– Price Premium on Non-market Benefits
• WTA > WTP for same product
– Why?
• Effect of experimental design elements
• How could experiment have been designed
differently?
• Why is experimental design so important?
Experimental Lab Report*
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Abstract (Cover Page)
Background
Experimental Methods
Results (Graphs and Figures)
Discussion
References
*Handout # 4: Lab Report Template
Rubric*
*Handout # 5:Lab Report Rubric
Student Evaluations
Student Evaluations
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