Experiment provides a controlled setting. The researcher can choose and manipulate the independent variable. He can also create and manipulate the conditions of the environment to suit his needs. Experiments are perfect to explore causal relationships. However the often lack external validity and are susceptible to bias.

Observation is a tool used to record the events happening in our natural surroundings. We can use this tool to observe how people behave in their natural surroundings, hence our findings will have high external validity. However we cannot choose the independent variable or manipulate the conditions of the environment in the obeservation. Observation is great for understanding hermunistic relationships between phenomemon.

Idealistically observation method can be used to find new avenues of research. After a particular behavioural phenomenon is selected we can further explore the causal relationships between various factors through an experiment.

Hence there is no better or superior method. Experiment and observation are merely tools as such there is a proper time and place to use each.