Advancing Strategic Decision Science Since 2014
While game theory provides elegant mathematical predictions, the Nevada Institute of Game Theory believes these predictions must be subjected to rigorous empirical testing. Its Experimental Economics program, operating one of the most advanced laboratories of its kind, serves as this crucible. The lab allows researchers to create controlled, simplified micro-societies where human subjects make strategic decisions for real monetary rewards. By varying the parameters of the game—the payoffs, the information, the number of repetitions—and observing the resulting behavior, researchers can test the core assumptions and equilibrium predictions of game-theoretic models. This work has been instrumental in the development of behavioral game theory, which modifies standard theory to account for the systematic deviations observed in the lab, such as concerns for fairness, trust, and limited rationality.
NIGT's experimental work adheres to the highest standards of the field. Participants are recruited from a diverse subject pool and are fully informed that their decisions will determine their earnings, ensuring salient incentives. All interactions are typically anonymous and conducted via computer terminals to minimize extraneous social influences. Software like z-Tree or oTree is used to program complex game structures and collect precise, time-stamped data. Studies often employ the strategy method, where subjects specify their complete plan of action for all possible contingencies, providing richer data on beliefs and intentions. Pre-registration of experimental designs and hypotheses is standard practice to ensure the integrity of the research process. This methodological rigor gives the Institute's experimental findings substantial weight in academic and policy circles.
The lab routinely runs classic games that serve as building blocks for more complex theories. In Ultimatum and Dictator Games, they measure social preferences like inequality aversion and altruism. Trust and Gift Exchange Games explore the foundations of reciprocity and relational contracts. Public Goods Games and Common Pool Resource games study the tragedy of the commons and the conditions under which cooperation can be sustained, including the effect of punishment and reward institutions. Auction experiments test revenue equivalence theorems and bidder behavior in different formats. Coordination games examine how groups settle on conventions. From these simple settings, profound insights emerge: for example, that cheap talk can facilitate coordination, that voluntary punishment can sustain cooperation but can also lead to feuds, and that market experience can drive behavior closer to the self-interested Nash prediction in some settings.
Going beyond choices, a specialized subset of experiments at NIGT incorporates physiological and neural measurements. Using tools like eye-trackers, galvanic skin response sensors, and heart rate monitors, researchers can correlate strategic decisions with measures of attention, arousal, and stress. In collaboration with neuroscience centers, some studies use functional MRI to observe brain activity during strategic play. This neuroeconomic research seeks to identify the neural substrates of strategic thinking, such as the brain regions involved in calculating a best response, experiencing regret, or suppressing impulsive retaliation. This interdisciplinary approach aims to build a more complete, biologically grounded understanding of decision-making, linking the abstract mathematics of game theory to the physical workings of the human mind.
The ultimate value of lab experiments lies in their ability to inform real-world design and policy. Before a new auction format is used to sell billions in spectrum licenses, it is tested in the lab with human subjects to uncover unanticipated strategic loopholes. Proposed regulations for emissions trading or fishing quotas are first simulated in controlled environments to see how participants respond. The lab serves as a 'wind tunnel' for institutional design. Furthermore, by identifying the conditions that promote trust, cooperation, and efficient outcomes in the lab, NIGT researchers provide evidence-based recommendations for improving organizational structures, contract design, and community governance. The Experimental Economics program thus ensures that the Nevada Institute's theoretical work remains empirically validated and practically relevant, grounding the science of strategy in the reality of human behavior.