Smith, Vernon L (1927– )

US economist who was awarded the 2002 Nobel Prize for Economic Sciences (with US psychologist Daniel Kahneman) for introducing laboratory experiments into economic research.

Smith set the standards of accuracy in laboratory experiments in economics and developed new methods of research. He worked out the theoretical equilibrium price (a price acceptable to as many buyers as sellers) and invented what are called ‘wind tunnel’ experiments to test in advance the outcome of plans for alternative market designs, for example in the case of the deregulation or privatization of utilities such as gas or electricity. He also introduced a technique known as the induced value method, which solved the problem in which the people taking part in experiments in the role of buyer are influenced by their own likes and dislikes.

His publications include Papers in Experimental Economics (1991) and Bargaining in Market Behavior (2002).