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Experimental Economics Research at McMaster University, a brief history from McEEL to McDSL

McMaster University has been an active centre for laboratory experimentation in economics since 1986, when Stuart Mestelman and Douglas Welland began a systematic investigation of advance production in auction markets.  The McMaster Experimental Economics Laboratory (McEEL), the first computerized laboratory of its type in Canada, was established in 1994, funded in large part by a Canadian Tri-Council Eco-Research Grant.  Since that time, this research program has produced more than seventy-five publications, eight completed PhD dissertations, many post-doctoral fellowships, and an ongoing stream of works in progress. 

A central theme of our original work related to environmental regulation is the interplay of market power and the design of institutions (i.e., rules / laws) for pollution emissions trading.  In early work, Muller and Mestelman demonstrated the high efficiency of trading in shares (which permit trading in future emissions) and the price-stabilizing effects of permit banking. Later work with Godby and Spraggon (Ph.D. students at the time) established that monopolists can effectively exercise their power in emissions trading markets, even under the pro-competitive conditions of a double auction. Other emissions trading research with Buckley (a Ph.D. student), funded by SSHRC, investigated whether open-market, baseline-and-credit trading plans, as has been proposed by the Government of Canada, will inefficiently expand output in regulated industries, relative to cap-and-trade plans which have more recently been recommended by many Canadian provinces.  On-going work in this area continues to inform public policy on pollution and the economics of environmental emissions control. 

A second theme of our research over the years concerns common property resources. Muller and Vickers (an undergraduate) investigated the role of communication when common property resources are subject to probabilistic destruction while Moir (a Ph.D. student) studied the roles played by monitoring and sanctioning non-cooperative behaviour. More recent research with Buckley and Schott (a Post-Doc Fellow) investigated whether the incentive for over-exploitation of common pool resources can be offset by incentives for shirking implied by team production. This work has been extended further with the inclusion of Zhang (a Post-Doc Fellow) to the team as the role of communication on the success of output sharing is studied. Other research concerns enforcement of environmental regulations, specifically alternative regulatory plans for non-point pollution sources (Spraggon) and cost-minimizing approaches to inspection (with J. Clark of University of Canterbury).

A third research theme concerns the voluntary provision of public goods, a topic closely related to common property resources. A series of papers by Chan, Mestelman, Muller, Godby and Moir have investigated the role of heterogeneity in tastes and endowment in the context of interior optima.  Mestelman and various co-authors have investigated the role of value orientation in public goods contributions and on trust and reciprocity, research and development as a public input and volunteering a public service. 

A fourth, more recent, research theme explores issues of funding and financing in health care. This work is funded by CIHR and brings together a team of public economists (Cuff, Nuscheler), health economics (Hurley, Grignon) and experimentalists (Buckley, Mestelman, Muller and Cameron). A major initiative in this area has been to experimentally evaluate the impact of the introduction of private health care into an environment characterized by public health care similar to that in Canada.  

Over the years, a great deal of other research at the laboratory defies easy categorization, including papers on order of play and forward induction in game theory (Muller and Sadanand); the behaviour of financial auditors (Mestelman and Shehata): responses to wage taxation (Sillimaa); speculation in currency markets (Childs); the role of middlemen and system supply contracts in gas markets (Bloemhof); the impact of productivity shocks on effort and wages in efficiency-wage environments (Mestelman and Scarth), and; the role of social value orientation and risk on trust and reciprocity (Kanagaretnam, Mestelman, Nainar and Shehata).

In 2014, a team led by Jeremiah Hurley was awarded a Canada Foundation for Innovation (CFI) grant that funded the creation of our next generation laboratory facility - the McMaster Decision Science Laboratory.  Located in L.R. Wilson Hall on McMaster University, McDSL opened in 2016/17 and our research capacity now goes well beyond the early empirical, mostly quantitative, experimental economics focus of McEEL.  McDSL now include resources and dedicated spaces to further allow for qualitative and advanced computer exploration of a variety of research areas that involve human participant decision-making.  We continue to run controlled, experimental sessions with participants inside the new advanced McDSL Experimental Suite, including our own research as well as that of others who use our facilities.  Many of these experiments have been custom-programmed using software and packages like Borland Delphi, Java and PHP, Z-Tree and O-Tree, Unity for in-lab and remote participation.  Our work also involves the systematic use of survey instruments (national, provincial and local samples) to experimentally examine topics like fairness in the allocation of scarce health resources; perception of (aversion to) financial and health inequalities; hospital patient needs and preference assessments; government health benefits preferences; effects of cigarette packaging on smoking behaviours.  We are also excited to have most recently begun exploration of the use of virtual-reality technologies in decision experiments to simulate levels of health (Thomas).