| Game: #31 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Trading in a pit market |
| Objective: | Illustrate the convergence toward an efficient, competitive equilibrium. |
| Reference and contact: | Holt, Charles A. "Classroom Games: Trading in a Pit Market." Journal of Economic Perspectives, 10(1), Winter 1996, pp. 193-203. cah2k@virginia.edu |
| Abstract: | Playing cards are used to assign buyer and seller values in pit auction. Students mingle in a common area to negotiate trades over a number of trading periods. The prices and number of trades then form the basis of class discussion regarding the theoretical power of the basic competitive model. |
| Class size: | 10 to 25 students. |
| Time: | One class period. |
| Variations: | Price controls and shifts in supply and demand can easily be introduced. |
| See also: | Price system games |
| Game: #32 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Price system and property rights. |
| Objective: | To illustrate a number of basic economic concepts through a simple price allocation mechanism. |
| Reference and contact: | Mateer, G. Dirk. "Selling Seats Through An English Auction," Classroom Expernomics, 6(2), Fall 1997, pp. 3-4; gdmateer@gcc.edu |
| Abstract: | An English auction of classroom seats is used to illustrate a variety of economic concepts including scarcity, opportunity costs versus sunk costs, shortages and surpluses, and the role of property rights. At the first class meeting of the semester, the instructor auctions off classroom seats to the highest bidder. A minimum price of $0.05 per seat was imposed (the proceeds of the auction went toward a class party). The auction starts with the seat in the front row that is nearest the door and proceeds across the row and toward the back of the room. Any seat not bid upon becomes the property of the instructor. Students who do not purchase a seat are declared "homeless" and must sit in the front row on a first come basis. It was found that students were willing to pay more the further the seats were from the professor. |
| Class size: | Any size. |
| Time: | Less than one class period. |
| Variations: | Imposing a price ceiling or a higher price floor. |
| See also: | Price system games |
| Game: #33 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Market Equilibrium |
| Objective: | To demonstrate the equilibrium properties of three different trading institutions. |
| Reference and contact: | Damodaran, Ashwin, Heather Farish, and Suzanne Stewman. "A Real Life Experience With Supply and Demand," Classroom Expernomics, 3(1), Spring 1994, pp. 2-5. |
| Abstract: | Three different trading institutions were used to examine the resulting equilibrium properties in terms of prices and quantities. The study was carried out by three undergraduate students as part of an undergraduate workshop in experimental economics at Centenary College. The trading institutions included a double oral auction, a buyer posted-bid market, and a seller posted-offer market. The double oral auction was of the negotiated-price version using a "trading pit." In the buyer posted-bid market, students were divided into equal numbers of buyers and sellers. In a given round, buyers simultaneously posted their bid on the blackboard. Sellers were then (sequentially) asked whether they wanted to accept any of the posted bids. If a bid was accepted, it was recorded as thus and, therefore, no longer available to any other seller. Trading continued until all sellers had the opportunity to trade. Bids were posted over five trading rounds. The seller posted-offer market was similar in design except that the sellers had to post prices and the buyers did the shopping. |
| Class size: | 10 to 30. |
| Time: | A couple class periods to do all three trading institutions. |
| Variations: | None indicated. |
| See also: | Price system games |
| Game: #34 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Posted-offer markets and market concentration. |
| Objective: | Illustrate the nature of competitive and monopoly outcomes. |
| Reference and contact: | Parker, Jeffery. Economics 201: Instructor's Laboratory Manual. Reed College, November 1993; parker@reed.edu |
| Abstract: | Students play the role of producer/seller under a posted offer trading institution in which market demand is fixed – yet unknown to the sellers. Market demand is represented by the instructor in the form of a table containing price and quantity demanded data. Student/sellers are given marginal and total cost of various production levels and each period must determine how many units to produce and what price to charge. After several periods, the sellers are merged into pairs in order to simulate market concentration. After several more periods, all sellers are merged into a monopoly seller. |
| Class size: | Class can be divided into separate markets with 4, 6, or 8 students in each market. The even numbers are necessary to accommodate the mergers. |
| Time: | One class period. |
| Variations: | Instructor can impose the usual price controls and taxes or introduce various inventory costs or allow for inventories to be carried over from one period to the next. Instructor could also begin with monopoly and then divest into several independent firms. |
| See also: | Monopoly games |
| Game: #35 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Monopoly pricing. |
| Objective: | To demonstrate the effects of monopolization on a competitive market. |
| Reference and contact: | Hazlett, Denise. Economic Experiments in the Classroom. Reading, MA: Addison Wesley Longman, 1999. (Experiment #6); hazlett@whitman.edu |
| Abstract: | Based on Wells (1991), this is nearly identical to Games #34 and #36. |
| Class size: | 10 to 40 students. |
| Time: | 45 minutes. |
| Variations: | None indicated. |
| See also: | Monopoly games |
| Game: #36 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Monopoly pricing. |
| Objective: | To demonstrate the effects of monopolization on a competitive market. |
| Reference and contact: | Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #7); yandell@acusd.edu |
| Abstract: | Based on Wells (1991), this is nearly identical to Games #34 and #35. |
| Class size: | 10 to 40 students. |
| Time: | 45 minutes. |
| Variations: | None indicated. |
| See also: | Monopoly games |
| Game: #37 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Firm's entry into a market. |
| Objective: | Illustrate the conditions under which entry into a market is profitable. |
| Reference and contact: | O'Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 241-242); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu |
| Abstract: | Class is divided into small groups of students representing firms. Each firm must purchase a license in order to enter a market in order to sell its product. Firms are provided information showing how the market price, output per firm, and the average cost of production vary with the number of firms in the market. Licenses are auctioned to the highest bidder. In each of the first several periods the instructor auctions off up to 7 licenses as long as firms bid a positive amount for one of the licenses. After the license auction is completed, firms calculate their profit based on the number of entrants into the market. During the later rounds, the instructor auctions off only 2 licenses. |
| Class size: | 7 and above. |
| Time: | One class period. |
| Variations: | None indicated. |
| See also: | Market entry games |
| Game: #38 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Fixed costs and entry. |
| Objective: | Demonstrates the implications of entry for prices and profits. |
| Reference and contact: | O'Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 242-243); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu |
| Abstract: | Class is divided into eight potential firms (teams of one to three students). Firms face a fixed and marginal cost of production and can produce up to two units per period. The rest of the class is divided into 16 potential consumers with varying reservation values. The experiment has two stages. In stage one, the instructor sequentially asks each potential firm whether they wish to enter the market. Once a firm enters the market, it must pay the fixed cost. In the second stage, each entrant must post a price for its output and consumers shop for the lowest posted price. Each firm can change its posted price up to three times per period. |
| Class size: | At least 24 as outlined above, though a simple rescaling to handle smaller classes is easy. |
| Time: | One class period. |
| Variations: | None indicated. |
| See also: | Market entry games |
| Game: #39 | |
| Course: | Micro and Macro |
| Level: | Principles and up |
| Subject(s): | Free entry and exit |
| Objective: | To illustrate the dynamics of entry and exit in a multi-market economy. |
| Reference and contact: | Garratt, Rod. "A Free Entry and Exit Experiment." Journal of Economic Education. 31(2), Summer 2000, pp. 237-243. garratt@econ.ucsb.edu |
| Abstract: | Students take on the role of farmers who must decide whether to enter one of four markets (corn, wheat, rice, or soybeans). Production costs differ for each crop and market prices depend on the amount supplied and consumer demand. Demand is simulated through a pre-determined inverse linear demand function with a slope of negative one. The classroom is divided into four market areas. Each student/farmer makes their supply decision by physically going to the market area they wish to enter (each farmer only supplies one unit of production per period). The number of farmers in a given market is totaled and the market prices and profits are then reported to all. The process is repeated for several periods until all markets yield equal (zero) profits. After a long-run equilibrium is achieved, a second stage is played in which a "Government Fallow Program" is instituted. The GFP guarantees each farmer $1 profit if they do not plant any crops (which is indicated by having the students physically move to the center of the room). Profits in the agricultural markets converge toward $1 or $2 within several periods. Topics for discussion can focus on the distinction between accounting and economic profit, barriers to entry, and the effect of government regulations. |
| Class size: | 10 to 50 students. |
| Time: | One class period. |
| Variations: | None indicated. |
| See also: | Market entry games |
| Game: #40 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Monopoly price discrimination. |
| Objective: | Demonstrates how a monopolist chooses different prices for different consumers in order to maximize profits. |
| Reference and contact: | O'Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 224-225); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu |
| Abstract: | A small group of students (three to five) are chosen to represent a museum which has a fixed marginal cost for each museum visitor. The rest of the class is designated as potential museum visitors, half of whom are senior citizens with senior-citizen cards. Each potential museum visitor is provided a reservation price. At the beginning of each round, the museum posts two prices, one for senior citizens and one for non-seniors. Visitors then choose whether to buy a ticket at the posted price. |
| Class size: | 10 and above. |
| Time: | One class period. |
| Variations: | None indicated. |
| See also: | Monopoly games |
| Copyright 2000 by Greg Delemeester
and Jurgen Brauer Last Updated: 02/20/2005 |