Determinants of Economic Interaction : Behavior or Structure

Abstract Experimental economics originated as examination of the behavior of aggregate phenomena, especially markets, populated by human participants motivated by their desire to attain their goals. The past two decades have brought two newer trends. One is a gradual but steady shift in the focus of the questions sought to be addressed through human experiments towards examination of micro level phenomena—individual preferences and behavior. The second is the expansion in the role of computer simulations to examine questions about aggregate level phenomena. This shift to individual behavior has accentuated the ever-present dilemma of social sciences in trying to be a science on one hand, and to understand our own self-conscious selves—the human beings—on the other. To address this dilemma, it would be useful to recognize three streams of experimental economics: (1) macro stream to examine the properties of social structures, (2) micro stream to examine the behavior of individuals, and (3) agent stream to explore the links between the micro and macro phenomena using computer simulations. At least the structural stream can be firmly rooted in the tradition of sciences (bypassing the free-will dilemma of social sciences), while the agent stream can span the gap between the behavioral and structural streams.