Games Economists Play: Games 111 - 120
| Game: #111 | |
| Course: | Micro, labor economics |
| Level: | Principles and up |
| Subject(s): | Job search in labor markets |
| Objective: | To illustrate the impact of search costs, unemployment compensation, and education on the labor market. |
| Reference and contact: | Haupert, Michael J. "Labor Market Experiment." Journal of Economic Education, 27(4), Fall 1996a, pp. 300-308; haupert@mail.uwlax.edu |
| Abstract: | Students take on the role of new entrants in a job search game. In the base experiment, students "search for jobs paying wages in a known range but with an unknown distribution." Each session lasts 20 periods and begins with a random draw of a wage offer from a 20-card deck of wage offers. Each student searching for a job has the option of accepting the wage offer or rejecting it. If accepted, the student becomes "employed" for the remainder of the session and earns an income equal to the accepted wage offer each of the remaining periods. If the offer is rejected, another random draw is made until all workers are employed or the end of the 20 periods is reached. Students record their earnings and aggregate labor market information (total employed and unemployed) each period. Later sessions introduce search costs, unemployment benefits, recessions, and education. Discussion can then focus on the impact of each variation on the search behavior of workers. |
| Class size: | Any number. |
| Time: | Three sessions and follow-up discussion can usually fit in one class period. |
| Variations: | None indicated |
| See also: | Labor market and Unemployment games |
| Game: #112 | |
| Course: | Micro, macroeconomics |
| Level: | Principles and up |
| Subject(s): | Comparative advantage and trade. |
| Objective: | To illustrate the importance of comparative advantage and specialization in generating gains from trade. |
| Reference and contact: | Haupert, Michael J. "An Experiment in Comparative Advantage." Journal of Economic Education, 27(1), Winter 1996b, pp. 37-44; haupert@mail.uwlax.edu |
| Abstract: | Students are divided into four different types of producers, capable of producing two goods (wheat and steel) from one input (labor). Each student must make production and trading decisions over a sequence of periods in order to reach a predetermined consumption goal for both goods. During the first decision making period, trading is not allowed so whatever combination of the two goods is produced is also what is consumed. In the second period, students may decide to produce a different combination and then enter a market in which they can only make one trade with another person. In the third and fourth periods, students may again trade with others, but they may consider a variety of offers from other players before settling on a binding agreement. Most students eventually discover that they will be able to meet their consumption goals only by specializing in the production of the good in which they hold a comparative advantage and then trading it for units of the other good. |
| Class size: | Any number |
| Time: | One class period |
| Variations: | Introduce a tariff in later periods |
| See also: | International trade games |
| Game: #113 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Oligopoly |
| Objective: | To illustrate strategic interaction among firms |
| Reference and contact: | Meister, J. Patrick. "Oligopoly – An In-Class Economic Game." Journal of Economic Education, 30(4), Fall 1999, pp. 383-391. |
| Abstract: | Each student represents a firm in an oligopolistic market. The firms compete on quantity only. The game is played over several weeks where the last round is unknown to students. Students know the market demand schedule, they know the cost-function (where, for simplicity, ATC=MC throughout the entire output range), the know the number of firms in the market, and each firm’s capacity constraint. Collusion is not permitted. The objective is for firms to make profit. Students earn extra credit points depending on the size of their profits. |
| Class size: | Any number (class can be divided into several, mutually independent, oligopolistic industries). |
| Time: | A few minutes every class, over several weeks. |
| Variations: | (1) permit collusion; (2) use the same demand and cost-curves across differently-sized industries; (3) announce which round will be the last round. |
| See also: | Oligopoly games |
| Game: #114 | |
| Course: | Micro, macroeconomics, money & banking |
| Level: | Principles and up |
| Subject(s): | Efficient markets hypothesis |
| Objective: | To illustrate the information processing ability of markets. |
| Reference and contact: | Feinstein, Steven. "Teaching the Strong-Form Efficient Market Hypothesis: A Classroom Experiment." Journal of Financial Education. 26(2), Fall 2000, pp40-44; feinstein@babson.edu |
| Abstract: | Two
experiments are run using an open outcry English auction.
In the first experiment, the instructor encloses a $10
bill in a sealed envelope to represent a share of stock
in a drug company. Students are told that the value of
the stock will be $10 if the drug is effective and only
$5 if the drug is ineffective. Each student is then given
a slip of paper with private information regarding the
actual effectiveness of the drug. The slips of paper come
in two types: those identifying the drug as effective (as
least three such slips per class, or 10% of participants
in large classes), and those identifying the drug as
ineffective. An English auction is then conducted with
all participants, including the insiders, for the right
to purchase the stock (envelope with the $10 inside).
Invariably, the envelope sells for a price close to $10,
thereby indicating that the high bids have revealed the
inside information. In the second experiment, the instructor encloses $4 in a sealed envelope to represent another share of stock in the drug company. Students are told that the value of the stock will be $12 if the drug is approved by the FDA and only $4 if the drug was not approved. Again, each student is given a slip of paper with private information regarding the FDA approval decision on the drug. At least three students should get a slip of paper indicating the drug was not approved. An English auction is conducted after the instructor announces that it is illegal for insiders to bid on the stock. In the author's experience, the envelope's selling price usually exceeds $4. |
| Class size: | Though not stated, a minimum of 8 - 10 students would seem necessary. |
| Time: | One class period. |
| Variations: | None stated. |
| See also: | Information games |
| Game: #115 | |
| Course: | Micro, macroeconomics, money & banking. |
| Level: | Principles and up |
| Subject(s): | Rational expectations and speculative bubbles |
| Objective: | To illustrate the role of divergent expectations in generating speculative asset bubbles. |
| Reference and contact: | Ball, Sheryl B. and Charles A. Holt. "Speculation and Bubbles in an Asset Market." Journal of Economic Perspectives, 12(1), Winter 1998, pp 207-218. |
| Abstract: | Students take on the role of asset traders over a sequence of 10 decision making periods. Traders begin with three units of the asset and a trading cash account. Ownership of the asset generates a dividend payoff of $1 at the end of each period. Not every asset survives until the last period. After dividends are paid at the end of a trading period, there is a 1/6 chance that any remaining asset will survive to the next period. During each period, the instructor acts as auctioneer by soliciting bids and offers. Though the price of the asset should reflect the sum of the expected dividends over the remaining life of the asset, the authors invariably observe an asset bubble that eventually crashes near the end of the 10 periods. |
| Class size: | At least five students as traders, though larger classes can be accommodated by using teams. |
| Time: | One class period. |
| Variations: | Allow for short-selling. |
| See also: | Information and asset market games |
| Game: #116 | |
| Course: | Micro, macro, international trade |
| Level: | Principles and up |
| Subject(s): | Exchange rates |
| Objective: | To illustrate the determination of exchange rates and reasons for their fluctuation. |
| Reference and contact: | Haupert, Michael, and Noelwah Netusil. "An Experiment in Foreign Exchange Markets." haupert@mail.uwlax.edu |
| Abstract: | Students take on the role of retailers purchasing domestic or foreign products for sale in the domestic market. The purchase of foreign goods requires students to submit bids for foreign exchange using a second price sealed bid auction. |
| Class size: | |
| Time: | One class period. |
| Variations: | Using a pegged or crawling exchange rate. |
| See also: | Foreign exchange market games |
| Game: #117 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Production possibilities, specialization, and opportunity costs. |
| Objective: | To illustrate the impact of specialization of resources on the construction of a PPF. |
| Reference and contact: | Anderson, David A. and James Chasey. "A Production Possibilities Frontier Experiment: Links and Smiles." Classroom Expernomics, 8(1), Fall 1999. |
| Abstract: | Students use scarce resources to produce two products, links and smiles, over a sequence of four rounds. The production results are used to construct PPFs. |
| Class size: | Any size. |
| Time: | One class period. |
| Variations: | None stated. |
| See also: | Supply games |
| Game: #118 | |
| Course: | Micro, game theory |
| Level: | Intermediate and up. |
| Subject(s): | Rational expectations, strategic interactions |
| Objective: | To illustrate the impact of strategic interaction involving issues of common knowledge of rationality. |
| Reference and contact: | Nagel, Rosemarie. "A Keynesian Beauty Contest in the Classroom." Classroom Expernomics, 8(1), Fall 1999. |
| Abstract: | Students participate in a contest in which they must select a number between 0 and 100 and the winner is the person who is closest to some fraction of the average choice. Game theoretic models predict that the unique equilibrium strategy is to chose 0. Nagel's results, however, indicate that most players do not make this choice. The results lead to discussions about different reasoning strategies. |
| Class size: | Any class size. |
| Time: | One class period. |
| Variations: | Contest may be repeated over several rounds and under a variety of information conditions. |
| See also: | Information and game theory games |
| Game: #119 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Utility maximization |
| Objective: | To introduce students to the utility maximzing rule. |
| Reference and contact: | Mason, Paul M. and Michael M. Fabritius. "Using Student Data to Teach Utility Maximizing Behavior." Classroom Expernomics, 9(1), Fall 2000. |
| Abstract: | Students maintain an activities log of their daily schedule and evaluate the average utility derived from each minute from a list of 10 activities on a -100/+100 scale. Students also record the costs of the various activities in terms of how much they would be willing to pay to engage in a good activity or to avoid a bad activity. An activity is chosen in order to determine a baseline MU/P ratio in which to compare with all other activities. Students then calculate the monetary value per minute for each of the other ten activities and compare the results with those implied by the equimarginal principle. |
| Class size: | Any size. |
| Time: | Less than one class period to do the calculations and discuss the results. |
| Variations: | None stated. |
| See also: | Demand games |
| Game: #120 | |
| Course: | Micro, public finance |
| Level: | Principles and up |
| Subject(s): | Equity/Efficiency tradeoffs |
| Objective: | To illustrate issues regarding equity and efficiency regarding income distribution. |
| Reference and contact: | Alden, Lori. "The Distributive Justice Game." Classroom Expernomics, 9(1), Fall 2000. |
| Abstract: | Students are told that a limited number of resources (pens, chairs, textbooks, etc.) will be made available for an upcoming extra credit quiz. The resources are initially distributed according to student characteristics (such as race, sex, wealth). Following Rawls' "veil of ignorance", students are informed that prior to the quiz-taking, all students will be "reborn" with new characteristics. Students must then jointly draft a "social contract" to redistribute the resources before the quiz can be taken. |
| Class size: | Class is divided into groups of ten students. |
| Time: | One class period. |
| Variations: | None stated. |
| See also: | Fairness games |
| Copyright 2000 by Greg Delemeester
and Jurgen Brauer Last Updated: 02/20/2005 |