Lynne Kiesling is Director of the Center for Applied Energy Research at the International Foundation for Research in Experimental Economics (IFREE), as well as a Senior Lecturer in the Department of Economics at Northwestern University and a Senior Research Scholar at the Interdisciplinary Center for Economic Science at George Mason University. The author expresses her gratitude to Michael Giberson, Kent Lassman, and Tim Mount for their valuable contributions and comments. Using Economic Experiments to Test Electricity Policy The industry’s history of central generation, coordination, and regulation breeds a natural suspicion of whether or not decentralized coordination and a more market-based, decentralized regulatory approach can work. To see how people will behave in a decentralized environment with decentralized institutions, one must test the environment and institutions experimentally, with real people. Lynne Kiesling C areful application of the scientific method can pro- vide tremendous results to real- world problems. Scientists fight disease and inventors create new products. All over the world, students learn to observe, hypothesize, predict phenomena related to the hypothesis, and finally, to test the predictions and hypothesis with a controlled experiment. In the realm of public policy, experimental economics has applied this same formula successfully for decades. It is time to apply this tool to the discovery and testing of novel regulatory institutions. Specifically, advances in technology and in economic theory have made decentralized regulatory institu- tions possible and more benefi- cial, and experimental economics provides the best set of tools for finding and investigating decen- tralized institutions that will be effective and valuable. I. Experimental Test-Bedding of Policy Experimental economics is a relatively young field, having grown following Vernon Smith’s seminal work in the early 1960s. 1 November 2005, Vol. 18, Issue 9 1040-6190/$–see front matter # 2005 Published by Elsevier Inc., doi:/10.1016/j.tej.2005.09.008 43