Haas School’s high-tech research facility tests social-science theories
| 22 July 2004
XLab, a new research facility at the Haas School of Business, is helping to lead a scientific revolution by bringing controlled laboratory experiments to social-science fields that, until now, have not made much use of experimentation.
Economists, political scientists, anthropologists, and other campus social scientists have begun testing their theories in the new high-tech XLab — short for Experimental Social Sciences Laboratory — to determine whether they can be applied to real-world problems, including those in business and management.
For example, Haas School Associate Professor John Morgan, an economist and the director of XLab, recently conducted an experiment in the facility to find out what produces greater revenue for sellers when a company is put up for sale — asking for payment in shares of stock, or in cash. The test supported the theory that shares bring in more revenue for the seller in a bidding contest.
“This idea comes from the economics literature, but it hasn’t really made its way out of the ivory tower,” said Morgan. “With XLab, we assess whether the theory works in practice and whether it will have a big strategic payoff in the marketplace.”
XLab, which opened earlier this year, uses the latest in wireless and notebook-computer technology and can accommodate up to 40 participants as experimental subjects. At its core, the lab consists of 50 battery-powered, wireless laptops that can be easily moved on mobile carts. While the lab is completely portable as a result, its normal home is in two large rooms at the Haas School.
A bidding war . . . for $50
In Morgan’s experiment, students took on the roles of corporate chieftains bidding against one another to buy a firm that was up for sale. The students in the experiment adopted a variety of real-world strategies in deciding how much to offer for the firm, using laptop computers outfitted with custom-designed software that provided real-time information on bids to all participants and helped to calculate the consequences of various decisions. The students who came up with the winning strategies would each earn $50, providing an incentive to play competitively.
Experimentation in the social sciences got a big boost recently when economists Daniel Kahneman and Vernon Smith won Nobel Prizes in economics in 2002 for their pioneering use of experimental methods to understand economic decision-making.
Now, Morgan wants UC Berkeley’s XLab to become a premier center for experiments, with the hope of bringing together various fields in the social sciences through experiments involving human behavior and decision-making.
“Within economics, for instance, experimental economics has not been recognized as a methodological tool until fairly recently,” said Morgan. “Now, there is growing recognition of the importance of the field as well as recognition that XLab is a critical tool to help us discover new knowledge.”
The facility is also helping UC Berkeley graduate students learn about new methods to conduct research in their fields, and some are using XLab for their dissertations. “Generations of grad students will be influenced by being exposed to experimental methods, in addition to learning theory, econometrics and data analysis,” said Morgan.
XLab is being funded by a seed grant from the National Science Foundation, with additional money from the campus’s vice chancellor for research, Haas School of Business, California Management Review, Center for Information Technology Research in the Interest of Society (CITRIS), and Hewlett-Packard.
The facility’s principal investigators at Berkeley include Nobel-winning economist George Akerlof and Haas School professors Teck Ho, Barbara Mellers, and Morgan.
UC Berkeley’s XLab is one of the largest of its kind in the country. Other universities with large, similar facilities include UCLA, the University of Arizona, and Harvard University.
The facility is also one of the first to use wireless technology. Morgan said this “radically different lab design provides enormous flexibility — a competitive advantage for XLab.” The laptop computers can be used anywhere, with any configuration, permitting, for example, small groups of individuals to work together comfortably, something not always possible in older labs with fixed computer stations.
Morgan said XLab is designed to “dramatically lower the ‘barriers to entry’ for researchers” by making it easy and convenient to propose an experiment and to get started. It does this by providing some funding for projects, including paying subjects’ participation fees, maintaining adequate space and computer systems, and by complying with federal rules on using human subjects in research. For example, getting an okay to conduct an experiment involving humans at Berkeley could take as long as a semester. Now, using blanket protocols, XLab can reduce the waiting time to two days.
For more information, visit the XLab website at xlab.berkeley.edu/.