| Game: #81 | |||||||||||||||||||
| Course: | Macro | ||||||||||||||||||
| Level: | Principles and up | ||||||||||||||||||
| Subject(s): | Keynesian aggregate demand model. | ||||||||||||||||||
| Objective: | Simulates the income determination of a two-sector macroeconomy. | ||||||||||||||||||
| Reference and contact: | Benson, Charles S. Jr, and Tesa Stegner. "An Aggregate Demand Driven Macroeconomic Equilibrium Experiment." Classroom Expernomics, 6(2), Fall 1997, pp. 5-8. | ||||||||||||||||||
| Abstract: | Students take
on the role of consumers in a simple two-sector
macroeconomy with a fixed amount of investment spending.
Students are randomly assigned to one of four different
income groups as follows:
Students must decide how to allocate income between consumption and saving over a series of rounds. Spending choices for all players are then summed and entered into a computer spreadsheet in order to calculate that period's equilibrium income. If aggregate spending is too low, then one or more consumers become unemployed the following period. If aggregate spending is too high, inflation results and consumer spending is adjusted downward (reflecting the impact of inflation). The consumption-saving decision is governed by separate incentive mechanisms involving bonus grade points. |
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| Class size: | 20 players (larger classes can assign teams of students) | ||||||||||||||||||
| Time: | 75 minutes | ||||||||||||||||||
| Variations: | Change the initial income distribution to reflect the current US distribution or one of perfect equality. One could also add a "safety net" to consumer spending decisions. Variable interest rates which depend on the amount of savings could be added. Consumer spending could come out of current income or saving. Investment could be set as a fixed percentage of GDP. | ||||||||||||||||||
| See also: | Aggregate demand games |
| Game: #82 | |
| Course: | Macroeconomics, game theory |
| Level: | Intermediate |
| Subject(s): | Consumption-Investment tradeoff |
| Objective: | To illustrate the nature of dynamic optimization problems. |
| Reference and contact: | Noussair, Charles and James Walker. "Student Decision Making as Active Learning: Experimental Economics in the Classroom." Paper presented at the American Economic Association Meetings, Chicago, IL, January 1998; noussair@mgmt.purdue.edu ; walkerj@indiana.edu |
| Abstract: | Students must solve a dynamic optimization problem based on a neo-classical growth model. Students must choose the level of consumption and investment over a ten period time horizon. Choosing too much consumption at one time lowers the capital stock available for the future which, in turns, limits consumption possibilities in the future. Students are provided with payoff tables representing their production and consumption possibilities. |
| Class size: | Any number. |
| Time: | One class period. |
| Variations: | Original experiment is computerized. |
| See also: | Economic growth games |
| Game: #83 | |
| Course: | Macroeconomics |
| Level: | Principles and up |
| Subject(s): | Inflation uncertainty |
| Objective: | Illustrates the impact of inflation uncertainty on the market for loanable funds. |
| Reference and contact: | Hazlett, Denise. Economic Experiments in the Classroom. Reading, MA: Addison Wesley Longman, 1999. (Experiment #9); hazlett@whitman.edu |
| Abstract: | Students take on the role of borrowers and lenders in a double auction market. Since trades are negotiated in nominal terms, the ultimate payoff to borrowers and lenders depends on the inflation rate – which is only revealed after a trading period is completed. Thus, unexpectedly high inflation benefits borrowers and harms lenders. The experiment is first run with zero inflation to establish a base. Next, the instructor announces that inflation will be 4% with certainty. Later periods operate under uncertainty in that the inflation rate could be 3%, 4%, or 5% with equal probability (determined by the roll of a die). |
| Class size: | 10 to 50 students. |
| Time: | One class period. |
| Variations: | Increase the range of uncertainty beyond the three possibilities named above. |
| See also: | Inflation and interest rate games |
| Game: #84 | |
| Course: | Microeconomics, macroeconomics, international economics |
| Level: | Principles and up |
| Subject(s): | Exchange rate controls in a developing country |
| Objective: | Demonstrates that an overvalued currency suppresses trade, benefits importers, and hurts exporters. |
| Reference and contact: | Hazlett, Denise. Economic Experiments in the Classroom. Reading, MA: Addison Wesley Longman, 1999. (Experiment #10); see also Hazlett, Denis and Jeela Ganje. "An Experiment with Official and Parallel Foreign Exchange Markets in a Developing Country." Journal of Economic Education Vol. 30, No. 4 (Fall 1999), pp. 392-401; hazlett@whitman.edu |
| Abstract: | Students take on the role of traders in a developing country: half are exporters and half are importers. The traders must either purchase foreign currency (dollars) so that they can import goods from the US, or they can sell foreign currency because of exports to the US. The government has established an overvalued exchange rate at which the domestic currency trades with the US dollar. Since the government does not have enough foreign reserves to meet the demand at the official rate, an unofficial parallel market handles the excess demand. A double auction trading institution is used for the parallel market. |
| Class size: | 10 to 50 students. |
| Time: | One class period. |
| Variations: | None indicated. |
| See also: | Foreign exchange games |
| Game: #85 | |
| Course: | Macroeconomics |
| Level: | Principles and up |
| Subject(s): | Employment and prices in a simple macroeconomy |
| Objective: | To teach concepts of circular flow, real and money wages, unemployment, and Keynesian and quantity theories. |
| Reference and contact: | Goeree, Jacob K. and Charles A. Holt. "Employment and Prices in a Simple Macroeconomy." Southern Economic Journal, 65(3), January 1999, pp 637-647; cah2k@virginia.edu |
| Abstract: | Students take on the role of either a worker or a firm and then participate in two markets: a labor market and a goods market. Student roles should be assigned such that there are two workers for every firm. Workers must decide how much of their leisure time to consume or sell to firms. Firms use the labor to produce goods which they sell to workers or consume themselves. Since firms require labor to produce goods, the labor market operates before the goods market. Playing cards are used to represent money (red cards) and goods (black cards). Each firm begins with 26 red cards in order to buy labor. Workers begin with three black cards in each period. "The markets operate in sequence: firms post wages, workers sell labor and/or retain leisure, firms produce output, firms post prices, workers purchase output, and final consumption determines 'earnings' for the period before a new labor/leisure-time endowment is given to workers for the next period" (p. 638). |
| Class size: | 6 to 40 students. |
| Time: | One class period. |
| Variations: | Introduce a ‘government’ that can ‘print’ additional red cards in order to simulate an increase in money supply. |
| See also: | Macroeconomic equilibrium games |
| Game: #86 | |
| Course: | Macroeconomics |
| Level: | Principles and up |
| Subject(s): | The Lucas Island experiment |
| Objective: | Demonstrates the effects on real aggregate output of anticipated and unanticipated monetary policy. |
| Reference and contact: | Hazlett, Denise. "The Lucas Island Experiment." Classroom Expernomics, 5(2), Fall 1996; hazlett@whitman.edu |
| Abstract: | Students take on the role of worker/shopper living on separate islands. Each worker works on their own island, but shops at all of the islands. The experiment proceeds over a number of ‘days.’ At the beginning of each day the worker knows his nominal wage but only has an estimate of the price level, hence, only an estimate of the real wage. The worker must decide how many hours to work at the expected real wage. If real wages are high, he will want to work more than normal; if real wages are low, he will want to work less than normal. At the start of each day, the instructor acts as a radio announcer with the latest economic news concerning Fed behavior and the business cycle. Students base their price expectations on the news as they learn the connection between the business cycle and the Fed’s behavior. |
| Class size: | 10 students (or more if they team up). |
| Time: | One class period. |
| Variations: | None indicated. |
| See also: | Rational expectations games |
| Game: #87 | |
| Course: | Macroeconomics |
| Level: | Principles and up |
| Subject(s): | Savings/Consumption game |
| Objective: | To illustrate the generation of an aggregate expenditure curve. |
| Reference and contact: | Brauer, Jurgen. "A Savings/Consumption Game for Introductory Macroeconomics." Classroom Expernomics, 3(2), Fall 1994, pp. 9-11; and Brauer, Jurgen. "The Savings/Consumption Game: An Update." Classroom Expernomics, 7(1), Spring 1998, pp. 10-13; jbrauer@aug.edu |
| Abstract: | Students complete an expenditure survey for various hypothetical income levels. Students are to assume that their ‘job’ will pay the same income for the foreseeable future. The results are compiled by the instructor (using a prepared spreadsheet template) in order to generate a class-wide aggregate consumption (and savings) function. The data can conveniently be graphed for all to see and can provide fodder for discussion. Later classes develop an investment function (in which students think of themselves as firms). |
| Class size: | Any number. |
| Time: | One class period. |
| Variations: | Additional rounds can announce that the job paying a particular income level is only temporary in order to observe the impact of the change on the consumption function. Instructors could also include line items representing taxes and interest rates to represent changes in, respectively, fiscal and monetary policy. |
| See also: | Aggregate demand games |
| Game: #88 | |
| Course: | Micro |
| Level: | Post-principles |
| Subject(s): | Initial property distribution; income and wealth distribution; developing nations; market power |
| Objective: | To demonstrate how initial property distribution can affect final wealth patterns |
| Reference and contact: | Stanley, Denise L. "Wealth Distribution and Imperfect Factor Markets: A Classroom Experiment." Journal of Economic Education, 32(4), Fall 2001, pp. 344-355; dstanle1@utk.edu |
| Abstract: | The game makes direct use of Parker Brothers’ Monopoly game. But unlike the commercial game, here each student is assigned to one of four initial endowment levels of real estate. In addition, student players are given differential earned incomes per turn and different credit rules apply to different players as well. Follow-up discussion includes computation of Gini-coefficients before and after the game. At present, the game is a zero-sum game and ends when one player goes bankrupt. |
| Class size: | Any number (separate games can be played simultaneously) |
| Time: | One class period (75 minutes). |
| Variations: | Change initial endowments, add taxes, encourage player cooperation and allow, if possible, for positive-sum effects. |
| See also: | Input market and wealth games |
| Game: #89 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | International trade; property endowments; environmental sustainability |
| Objective: | Illustrate the influence of political economy in international trade. |
| Reference and contact: | Peterson, Brian and Suzanne Wallace. "When the Classroom Mimics Reality: A Simulation in International Trade and Relations." Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=414606; bjp@manchester.edu and wallaces@central.edu |
| Abstract: | Students are assigned to different countries in three tiers of national income. Countries are endowed unequally with raw materials and capital goods. Students must produce and sell goods in order to survive (starvation is possible) while maintaining a minimum of environmental quality. Random events (hurricanes, droughts, civil wars, etc.) can affect the game. Students engage in discriminatory and criminal activities; they also display national loyalty. In addition to country players, some students are selected to serve as Chief Economist, Bankers, and Power Brokers (capital resource traders). ‘Starved’ students may reenter the game’s labor pool as itinerant workers for whom a separate labor market is set up. A ‘Game God’ can endow reentering students with different skill levels. |
| Class size: | 40 to 250 |
| Time: | One class period (each simulation year lasts about 10 minutes of play time) |
| Variations: | None indicated |
| See also: | International trade games |
| Game: #90 | |
| Course: | Micro |
| Level: | Principles and up |
| Subject(s): | Oligopoly |
| Objective: | Interdependent decision making; cartel formation; cartel break-down |
| Reference and contact: | Gerstner, Glenn. "World Oil Supremacy." Mimeo, St. John’s University, 1999; gerstneg@stjohns.edu |
| Abstract: | Class is divided into five or eight ‘country’ teams. The cost of producing oil is given (AVC=MC). Market demand is stable, but unknown, and depends on the production decisions of the players. The objective is for teams to produce the highest possible net revenue. |
| Class size: | Any number (separate games can be played simultaneously perhaps with one student monitor per set of teams) |
| Time: | One class period |
| Variations: | None indicated |
| See also: | Oligopoly games |
| Copyright 2000 by Greg Delemeester
and Jurgen Brauer Last Updated: 02/20/2005 |