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Hillary M. Sackett , Ph.D. Westfield State University

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 9 th Annual Economics Teaching Conference October 24 – 25 Austin, TX.

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Hillary M. Sackett , Ph.D. Westfield State University

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  1. 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

  2. Outline • Background • Course Design • Classroom Experiments • Two-week Module Simulation • Class 1: Lecture • Class 2: Problem Solving • Class 3: Classroom Experiment • Class 4: Discussion • Assessment • Experimental Lab Reports • Rubric • Student Evaluations

  3. Course Design • ECON 320: Environmental Economics • Objectives: Students will be able to… • Communicate, verbally and in writing, how social science knowledge is established and how this knowledge changes over time. • Evaluate evidence and apply it to solving problems using the scientific method. • Analyze data and construct theoretical and mathematical models of observed economics behavior. • Engage in interdisciplinary discussion of past, present, and future economic policies and their local and global impact.

  4. Course Design • Module Composition • Class 1: Lecture • Class 2: Problem Solving • Class 3: Classroom Experiment • Class 4: Discussion • Course Evaluation • Experimental Lab Reports (5)= 30% • Exam 1 = 20% • Exam 2 = 20% • Problem Sets (5) = 20% • Film Reviews (2) = 10%

  5. 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

  6. 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.

  7. Class 1: Lecture • Efficiency Standard • Maximize Net Benefits • Two categories of Benefits • Market Benefits • Non-market Benefits = Use + Option + Existence Value • Consumer Surplus • Welfare Analysis • WTP for Improvement vs. WTA for Compensation • WTP/WTA Disparity • Prospect Theory • Substitution • WTA >WTP – standard practice to use WTP • Non-market Valuation Methods • Contingent Valuation • Travel Cost • Hedonic Analysis • Experimental Auctions

  8. Class 2: Problem Solving* • In-class activity • Group Work • Professor available for questions *Handout # 1

  9. Class 3: Classroom Experiment: Handouts • Handout # 2: • Participation Agreement • Auction Instructions • How Does the Auction Work? • Discussion Questions • Handout # 3: • Bid Sheets Let the Auction Begin!

  10. Product 1: Walmart Great Value Maple Syrup

  11. Product 2: Natural Homegrown Michigan Maple Syrup

  12. 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

  13. 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

  14. 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?

  15. Experimental Lab Report* • Abstract (Cover Page) • Background • Experimental Methods • Results (Graphs and Figures) • Discussion • References *Handout # 4: Lab Report Template

  16. Rubric* *Handout # 5:Lab Report Rubric

  17. Student Evaluations

  18. Student Evaluations

  19. The BEST Comment YET

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