Games Economists Play: Games 121 - 130
| Game: #121 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Sealed-bid auctions |
| Objective: | To illustrate the value of competition in promoting "low cost" bidding as "best value." |
| Reference and contact: | Mounts, W. Stewart Jr. and M.J. Vaughan. 'Low Cost' vs. 'Best Value': Sealed-Bid, First Price Auction Experiments with Department of Defense Contract Specialists. Classroom Expernomics, 9(1), Fall 2000. |
| Abstract: | Non-traditional students from the defense industry participate in a series of sealed-bid, first price auctions in order to examine the congruence between "low cost" and "best value" bidding. The role of cost uncertainty in preparing bids is explored. |
| Class size: | Any number. |
| Time: | One class period. |
| Variations: | None stated. |
| See also: | Auction games |
| Game: #122 | ||||||||||||||
| Course: | Micro, game theory, law & economics, environmental economics | |||||||||||||
| Level: | Principles and up | |||||||||||||
| Subject(s): | Cooperation, defection, Nash equilibria | |||||||||||||
| Objective: | To illustrate the conflicts between social cooperation and individual self-interest. | |||||||||||||
| Reference and contact: | Holt, Charles A. and Monica Capra. "Classroom Games: A Prisoner's Dilemma." Journal of Economic Education. 31(2), Summer 2000, pp. 229-236. | |||||||||||||
| Abstract: | A deck of
playing cards is used to implement a prisoner's dilemma
situation in which each student is given two playing
cards--a red one and a black one. Each student is asked
to play a card by holding it to their chest. The
instructor then randomly pairs two students and asks them
to reveal their cards. Playing a red card raises the
player's earnings by $2 while playing a black card raises
the partner's earnings by $3 but does not change the
player's earnings. The game is described by the following
payoff matrix:
Applications discussed include duopoly price competition, product quality, bankruptcy, and public goods provision. |
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| Class size: | Any number. | |||||||||||||
| Time: | One class period. | |||||||||||||
| Variations: | Play the game in a repeated setting with the same or different partners. | |||||||||||||
| See also: | Game theory games | |||||||||||||
| Game: #123 | |
| Course: | Microeconomics, Macroeconomics |
| Level: | Intermediate |
| Subject(s): | General equilibrium, market clearing, price mechanism |
| Objective: | To illustrate the market clearing process in an endowment economy |
| Reference and contact: | Boháček, Radim. “A Market-Clearing Classroom Experiment.” Southern Economic Journal. 69(1) SSS 2002, pp. 189-194. radim.bohacek@cerge-ei.cz; http://home.cerge.ei.cz/Radim/experiment/ |
| Abstract: | Students receive a random endowment of two goods and proceed to make trades in order to maximize their utility as given by a simple utility function (e.g., U(r,g) = rg, where r and g represent the amounts of red and green paper each person possesses). |
| Class size: | 20 or more students |
| Time: | One class period (30-40 minutes) |
| Variations: | Different utility functions, more than two goods, price regulations |
| See also: | Price system games |
| Game: #124 | |
| Course: | Microeconomics, |
| Level: | Intermediate |
| Subject(s): | Rent seeking |
| Objective: | To illustrate the welfare consequences of rent seeking. |
| Reference and contact: |
Bischoff, Ivo and Hofmann, Kai. “Classroom Game on the Theory of Rent Seeking: Some Practical Experience.” Southern Economic Journal. 69(1) SSS 2002, pp. 195-199. Email: ivo.bischoff@wirtschaft.uni-giessen.de |
| Abstract: | This is a modified and extended version of Game #108. In the original game, four teams of students apply for a number of valuable telephone licenses over a series of decision rounds. One license, valued at $16,000, is allocated each round through a lottery. Each license application costs $3,000 in the first round and $1,000 in later rounds. For the modification, in order to more clearly illustrate the tendency toward rent seeking, the cost of a license is reduced to $1,000 for the first round and to $500 for subsequent rounds. Furthermore, an English auction is used to allocate licenses during the last round with the proceeds rebated to the teams. Student teams must also complete a questionnaire during the game in order to elicit thought regarding the decision-making process of the teams. |
| Class size: | 20 or more students |
| Time: | One class period |
| Variations: | None indicated |
| See also: | Public Choice games |
| Game: #125 | |
| Course: | Microeconomics, environmental economics, public finance |
| Level: | Principles and up |
| Subject(s): | Externalities |
| Objective: | To illustrate that the efficiency properties of tradable pollution permits is invariant to the initial distribution of permits |
| Reference and contact: |
Anderson, Lisa R. and Stafford, Sarah L. “Choosing Winners and Losers in a Classroom Permit Trading Game.” Southern Economic Journal. 67(1) SSS 2000, pp. 212-219. Email: slstaf@wm.edu |
| Abstract: | Nine firms must decide how much to produce of a pollution-causing product over a series of decision-making rounds. The market price of the product and the cost of abatement are induced by the instructor. In round one, student firms face no regulation. In round two, each firm is given one pollution permit but are unable to trade permits. In round three, each firm is again given one permit but are able to buy and sell permits in a pit auction. In later rounds, the initial allocation of permits is varied in random or strategically important ways and each firm is able to participate in the pit auction. |
| Class size: | In classes with more than nine students, simply use multiples of nine firms. |
| Time: | One class period |
| Variations: | Introduce an outside buyer of permits, reduce the number of permits over time, or allocate the initial permits through an English auction. |
| See also: | Externality games |
| Game: #126 | |
| Course: | Microeconomics, industrial organization |
| Level: | Intermediate and up |
| Subject(s): | Oligopolies, prisoner dilemma |
| Objective: | To illustrate the prisoner dilemma nature of oligopoly settings and the basis for an escape from the dilemma. |
| Reference and contact: |
Sorenson, Timothy L. “Theory and Practice in the Classroom: A Repeated Game of Multimarket Oligopoly.” Contemporary Economic Policy. 20(3) July 2002, pp. 316-329. Email: tsore@seatlleu.edu |
| Abstract: |
Students participate in a multimarket, repeated interaction pricing game in which cooperative strategies are engendered. Students are assigned to a firm and industry. Each industry is comprised of three firms. A preliminary two-period pricing game involving a homogeneous good is initially played to develop a sense of interdependency among firms. The primary pricing game involving a differentiated product is then played with an indefinite time horizon. Furthermore, each firm must submit prices for each of three market segments, one home market and two away markets. Students are required to submit a midterm and final analysis of the game. |
| Class size: | Any number. |
| Time: | Designed to be played over the course of an entire term. |
| Variations: | None indicated |
| See also: | Oligopoly games |
| Game: #127 | |
| Course: | Microeconomics, Game Theory, Behavioral Economics |
| Level: | Intermediate and up. |
| Subject(s): | Game theory |
| Objective: | To illustrate the principle of backward induction in a sequential move game |
| Reference and contact: |
Chaudhuri, Ananish. “A Simple Investment Game Experiment for the Classroom.” Classroom Expernomics: Volume 10 (Fall 2001). Available at ..expernom/Fall2001/Chaudhuri.html |
| Abstract: | Students are paired up with a fellow classmate in a double-blind setting to take part in a reciprocal trust “investment game.” A designated Sender is given $10 in which they may either keep all of it or send some (or all) of it to a Receiver. Any amount sent to the Receiver is tripled by the instructor. The Receiver may then decide to keep all of the money or send some of it back to the Sender. The principle of backward induction argues that since the Receiver has no incentive to send any money back to the Sender, the Sender would never send any money to the Receiver in the first place. However, if some form of reciprocal trust can develop between the Sender and Receiver, each party can be made better off than if nothing is sent in the first place. The game is repeated with students switching roles and anonymous partners. The game thus provides a forum in which to explore the nature of deviations from the backward induction principle. |
| Class size: | Any number. |
| Time: | 30 minutes (with results discussed in the next class period). |
| Variations: | None indicated |
| See also: | Game theory games |
| Game: #128 | |
| Course: | Microeconomics, International economics |
| Level: | Principles and up |
| Subject(s): | Comparative advantage |
| Objective: | To illustrate the gains from trade by exploiting the principle of comparative advantage |
| Reference and contact: |
Mason, Paul M. “Representative Templates and Methodology for Stodder’s Comparative Advantage Experiments.” Classroom Expernomics: Volume 10 (Fall 2001). Available at ..expernom/Fall2001/mason1.html |
| Abstract: | A revamped version of Game #48 by Stodder (1994). Students are paired up to take on the roles of two countries that must make production and consumption choices under a situation of autarky and then under a situation involving the possibility of trade. In the first version of the game, students are given linear production possibility schedules for two goods. In the second version, non-linear production possibility schedules are used. |
| Class size: | Any number. |
| Time: | One class period. |
| Variations: | None indicated |
| See also: | International trade games |
| Game: #129 | |
| Course: | Microeconomics |
| Level: | Principles and up |
| Subject(s): | Short run production, costs, and revenues |
| Objective: | To illustrate the productivity and cost concepts involved in a short run production process. |
| Reference and contact: |
Mason, Paul M. “A Production and Cost Experiment for Use in the Principles of Microeconomics.” Classroom Expernomics: Volume 10 (Fall 2001). Available at ..expernom/Fall2001/mason2.html |
| Abstract: | A variation and extension of Games #3 and 107, among others, in which student teams engage in a production process involving several fixed and variable inputs. |
| Class size: | Any number. |
| Time: | One class period for the experiment and another for the discussion |
| Variations: | Allow inventory carryover from period to period. |
| See also: | Supply games |
| Game: #130 | |
| Course: | Microeconomics |
| Level: | Principles and up |
| Subject(s): | Moral hazard |
| Objective: | To illustrate the nature of moral hazard regarding exam-taking behavior. |
| Reference and contact: |
Campbell, Noel and De Berry, Thomas. “Revisiting Teaching Moral Hazard: Additional Class-Room Experimental Results.” Classroom Expernomics: Volume 10 (Fall 2001). Available at ..expernom/Fall2001/campbell.html |
| Abstract: | Student scores of two quizzes provide the basis to evaluate the existence of moral hazard behavior. On the first quiz, students receive the score that they earn. For the second quiz, students are unexpectedly offered a minimum grade of “C” prior to taking the quiz. The grade floor is hypothesized to induce less studying effort on the part of students and, hence, lower quiz scores compared to the first quiz. The lower quiz scores would therefore be evidence of a moral hazard phenomenon. Though the evidence failed to support the moral hazard hypothesis, the experiment provided a pedagogical forum in which to discuss possible biases regarding the experimental design and other behavioral factors. |
| Class size: | Any number. |
| Time: | One class period to discuss results. |
| Variations: | None indicated |
| See also: | Information games |
| Copyright 2000 by Greg Delemeester
and Jurgen Brauer Last Updated: 02/20/2005 |