Blending experimental economics and living laboratories in water resource management

Akinsete, Ebun, Velias, Alina, Papadaki, Lydia, Chatzilazarou, Lazaros-Antonios and Koundouri, Phoebe (2025) Blending experimental economics and living laboratories in water resource management. Annual Review of Resource Economics, 17 (1). 149 - 165. ISSN 1941-1340

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Abstract

The increasing pressure on global water supplies from overexploitation, drought, and pollution necessitates efficient and sustainable water management. Integrated water resource management strategies have shown effectiveness in decision support, but a deeper integration of economic and participative methodologies is needed. This research reviews the core characteristics and directions of experimental economics and living labs (LLs) and aims to address three research questions, namely, how the participatory, real-world environment of living laboratories can be incorporated into the controlled, hypothesis-driven nature of experimental economics; what is the significance of behavioral insights that are derived from experimental economics in the design and implementation of living labs; and how these two approaches can be merged under one framework. The focus of this review is the improvement of water resource management through collaborative and stakeholder-driven innovation. LLs provide authentic environments for cocreation, allowing scientists and stakeholders to address water-related issues such as supply, demand, and shortage. These environments connect controlled experimental conditions with real applications, providing comprehensive insights into behavioral reactions and policy formulation. LLs can enhance and be strengthened by economic methodologies, particularly in water valuation through integrated frameworks accounting for environmental externalities and opportunity costs. Finally, this article shows that integrating behavioral insights and experimental approaches within LLs improves the external validity of experimental economics by putting interventions in real-world settings.

Item Type:	Article
Additional Information:	© 2025 by the author(s)
Divisions:	Psychological and Behavioural Science Management
Subjects:	T Technology > TC Hydraulic engineering. Ocean engineering H Social Sciences > HB Economic Theory B Philosophy. Psychology. Religion > BF Psychology
JEL classification:	C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General D - Microeconomics > D9 - Intertemporal Choice and Growth > D90 - General Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q25 - Water Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
Date Deposited:	21 Oct 2025 14:45
Last Modified:	21 Oct 2025 18:03
URI:	http://eprints.lse.ac.uk/id/eprint/129901

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