手動課堂遊戲

source: Games Economists Play by Greg Delemeester and Jurgen Brauer

Games Economists Play

Game: #1
Course: Micro
Level: Principles and up
Subject(s): Demand curve
Objective: To experimentally derive a demand curve
Reference and contact: Brock, John. “Experimental Derivation of a Demand Curve.” Classroom Expernomics, 1(2), Fall 1992, pp. 3-4. [adapted from Weidenaar (1972)]
Abstract: On a warm day, bring two ice-cold Coke-bottles to class (on a cold day, some hot coffee or chocolate). Ask how many students would be willing to pay 10c for one bottle; then 20c; and so on. Tabulate and graph the result (voil�: a demand curve). Then ask students to assume that the day was really a whole lot hotter (or colder) and repeat the exercise (the demand curve shifts).
Class size: Any size (for very large classes, deal only with a couple rows or columns of students)
Time: A few minutes
Variations: None indicated
See also: Demand games

 

Game: #2
Course: Micro
Level: Principles and up
Subject(s): Marginal utility/diminishing marginal returns
Objective: To teach students an intuitive understanding of total utility, marginal utility, and diminishing marginal utility
Reference and contact: Gillette, David and Robert delMas. “Psycho-Economics: Studies in Decision Making.” Classroom Expernomics, 1(2), Fall 1992, pp. 5-6; gillette@truman.edu
Abstract: Ask students to rate their present well-being on a scale of 0 (lousy) to 100 (bliss). Then feed them Hershey kisses, one at a time. After each ‘kiss,’ ask students to again rate their well-being. Collect the rating-sheets, tabulate, and display total utils, marginal utils, and (eventually) diminishing marginal utility. (Warning: the authors discovered at least one student whose marginal utility never dropped – a chocolate addict! Perhaps better to feed them marshmallows.)
Class size: Small to large
Time: Within one class period
Variations: None indicated
See also: Demand games

 

Game: #3
Course: Micro
Level: Principles and up
Subject(s): Short-run production/production costs
Objective: To help students understand TPP, APP, MPP, TFC, TVC, TC, MC, AFC, AVC, AC (and the associated short-run production and cost curves)
Reference and contact: Neral, John. “Widget Production in the Classroom.” Classroom Expernomics, 2(1), Spring 1993, pp. 7-8. or contact Dr. John Neral; Department of Economics; Frostburg State University; Frostburg, MD 21532; ph.: 1-301-689-4265 j_neral@fre.fsu.umd.edu
Abstract: Provide students with (or ask them to bring) lots of paper and a (working) stapler. Divide the class into large groups (say, eight or more per group). Provide each group with half a table of production room (the shop floor). That plus the stapler is the fixed capital input (K=1). The group is to produce as many widgets as possible (fold the paper twice and staple it) within one workday, say, a 30-second time period. Start with no labor (L=0) to produce Q=0, never minding the stares. Then increase to L=1; have the group record total production (TPP) in the 30-second time-span. Then increase to L=2 and so on until diminishing returns set in (perhaps even negative returns if you like). Let the groups compute, tabulate, and graph their TPP, APP, and MPP. Then assign costs, e.g., K=$10, L=$5, and let the groups compute, tabulate, and graph the cost variables. They should get something more or less bizarrely similar to the nice textbook curves. (They’ll learn about the convenience of abstraction pretty quickly this way.)
Class size: Small and up. For very large classes, part of the class could watch with amusement; they’ll get the point. Alternatively, part of the class could do the production runs; another part of the class to computation, tabulation, and graphing.
Time: One class period
Variations: None indicated
See also: Supply games

 

Game: #4
Course: Micro
Level: Principles and up
Subject(s): Simple market clearing
Objective: To demonstrate that and how supply and demand determine equilibrium market quantity and market price
Reference and contact: Nelson, Paul S. and Paul W. Grimes. “Supply and Demand Analysis: Using Markets Created in the Classroom.” Journal of Education for Business, 66(6), July/August 1991, pp. 370-373, which contains instructions, or contact Dr. Paul Grimes; College of Business and Industry; Mississippi State University; Mississippi State, MS 39762; pwg1@ra.msstate.edu
Abstract: Each student is assigned a position as a ‘buyer’ or a ‘seller’ in a fictitious market. The instructor hands out cards indicating each student’s reservation price as a buyer or a seller, with unique prices on each card. For example, the buyers’ cards range from $11 to $9 in steps of 10 or 25 cents, and conversely the sellers’ cards reflect a similar price range (sellers’ production costs).The instructor serves as auctioneer. Ask buyers and sellers to assemble across from each other. Ask for a opening offer to buy, say “Buyer 6 will buy at $5.00.” Any seller can accept (“Seller 3 accepts”). If a trade is completed, that pair of students exits the trading pit. The trade is recorded on the chalkboard. A trading round ends when no more offers to buy or sell are forthcoming. Then, all students rejoin the trading pit and a second round may be started.

In the authors’ experience a “stable equilibrium will be reached in three or four trading periods, which normally occurs an average of 15-20 minutes after the instructions are read” (Nelson and Grimes, 1991, p. 371).

Class size: Not much less than 10 buyers and 10 sellers; very large classes can be ‘reduced’ by designating groups of 2 or 3 students as ‘one’ buyer or seller.
Time: 50 minutes with time for probing (after all some potential buyers won’t buy and some potential sellers won’t sell at equilibrium price)
Variations: You can make this a labor, international, currency, future, or any market. You can shift demand and supply schedules by handing out a new set of cards with an appropriate explanation (e.g., as to why production costs have shifted). You can introduce a price control, floor or ceiling, and either announce it or not announce it. Or, instead of handing out new cards, ask students to change their reservation price between, say, 10% and 30%, so that even the instructor doesn’t know what is going to happen (except that an equilibrium will be reached).
See also: Price system games

 

Game: #5
Course: Micro
Level: Principles and up
Subject(s): Chaos and Order in Markets
Objective: To teach students (a) how apparently chaotic behavior is in fact orderly and (b) how economics makes correct predictions
Reference and contact: Gillette, David and Robert delMas. “Psycho-Economics: Studies in Decision Making.” Classroom Expernomics, 1(2), Fall 1992, pp. 5-6; gillette@truman.edu
Abstract: In your first lecture (first course lecture or first lecture on the price system), show students a sealed envelope, then start by asking students to write down one or two words to the question: “What comes to mind when you hear St. Louis, Kansas City, New York, or Los Angeles and 5 o’clock rush hour traffic?” (Answers usually are: headache, stress, and the like.) Without tabulating the results, go immediately to the first trading round of a double-oral auction market (see Game #4, #6, or #7). Then ask students to write down one or two words to the question: “If economic markets regularly behaved in this fashion, how would you describe their behavior?” (Usual answers: chaotic, confusing, unorganized, etc.) Then complete the other trading rounds until an equilibrium price and quantity is found. Open a sealed envelope which contains the predicted price-quantity equilibrium.
Class size: Small to large
Time: One class period
Variations: None indicated
See also: Price system games

 

Game: #6
Course: Micro
Level: Principles and up
Subject(s): Market clearing/market efficiency
Objective: Basically the same double-oral auction game described earlier (#4), but geared toward teachability and classroom efficiency.
Reference and contact: DeYoung, Robert. “Market Experiments: The Laboratory versus the Classroom.” Journal of Economic Education, 24(4), Fall 1993, pp. 335-351.
Abstract: The game is very similar to that described earlier (#4), and the author’s discussion primarily focuses on issues of exposition: how the instructor collects and displays the market information generated by the players so that economic concepts are more easily understood (the researcher employs experiments to ‘test’ theory, the teacher uses experiments to ‘teach’ theory, writes DeYoung). For example, by computing a market efficiency coefficient (actual surplus realized divided by potentially achievable surplus) over successive trading rounds, students see that over time they near 100% efficiency (as theory predicts). Thus, the objective is to set up the game and the information display to generate a large bundle of concepts (consumer/producer surplus, allocative efficiency, prices, equilibrium, deadweight loss, social value of free markets, and so on) that subsequently can be examined one-by-one in the theory lectures by reference to the game.
Class size: Small (10 to 30)
Time: One class period
Variations: Try a negotiated-price mechanism (i.e., a trading pit simulation) where ‘buyers’ and ‘sellers’ search one another and merely announce the completed trade to the instructor who then publicly displays the trade and price. The advantage is that there is no auctioneer involved. Further, because of search costs, it will take more trading rounds to achieve price convergence. Thus, one can easily introduce the concepts of how institutions and search (and, in another wrinkle, transaction) costs change the equilibrium dynamics of the market.
See also: Price system games

 

Game: #7
Course: Micro
Level: Principles and up
Subject(s): Buyer-seller auction-trading/general market-clearing exercise
Objective: To demonstrate the effect of different price elasticities on price convergence in the market (the more price elastic, the faster the convergence).
Reference and contact: Keating, Barry and James Grace. “The Walrasian Simulator.” Mimeo. Notre Dame, IN: College of Business Administration, University of Notre Dame, 1993, or contact Dr. Barry Keating and/or Dr. James Grace; College of Business; University of Notre Dame; Notre Dame, IN 46556; barry.p.keating.1@nd.edu
Abstract: Similar to #4 described earlier in that reservation-price cards are handed out to students. For the first run, the simulation may run for ten or so “trading days,” each “day” lasting about two or three minutes. Any completed trade (a buyer and seller agree on a price) is signaled to the instructor who writes the information on a board (or types it in a computer connected to a projector and display screen). Those completing a trade drop out of the market for that day. A trading day ends when no more trades occur. Play ten trading day rounds or so and plot the price per trade (or have a computer spreadsheet template prepared to quickly to do the plotting for you). Students will note that over repeated trading and trading days, the prices tend to converge toward the textbook ‘equilibrium’ price. Also compute (or have the spreadsheet compute and display) a convergence coefficient (the standard deviation of the actual trading prices per day divided by the predicted equilibrium price; the coefficient will likely consistently decline from day one to day n).Now rerun the game (for the same price-quantity equilibrium solution), but with steeper (or flatter) demand and supply curves (i.e., supply students with a different set of reservation-price cards). The steeper the slopes, the longer it will take to achieve convergence, and the higher the coefficient will be. That is, the same equilibrium conditions/solution can be brought about by different markets.

Once played, the students will much better appreciate the role of economic theory and better comprehend the static textbook equilibrium story as an outcome of the dynamic game.

Class size: Small and up (a small group could play; the others observe results displayed on an overhead projector)
Time: 75-minute class period
Variations: (a) play the basic price-clearing game early in the course; replay the same game as you introduce new concepts (e.g., elasticity or price floors/ceilings); (b) vary the number of players and observe convergence speed; (c) change from perfect information to uncertain information by not displaying the individual trades until each trading day is over; (d) make buyers/sellers pay for the price information (market intelligence); (e) allow more than one trade per day per buyer/seller; (f) introduce price floors/ceilings; and so on.
See also: Price system games

 

Game: #8
Course: Micro
Level: Principles and up
Subject(s): Monopoly prices
Objective: To experimentally demonstrate monopoly power
Reference and contact: Brock, John. “Experimental Derivation of a Demand Curve.” Classroom Expernomics, 1(2), Fall 1992, pp. 3-4. [adapted from Weidenaar (1972)]
Abstract: On the last lecture before your monopoly lecture, hand out a purchasing agreement on which students sign their name to agree to purchase from the instructor x-number of Coke-bottles for a range of prices (say, $1/bottle down to 20�/bottle). Students will think this recreates the earlier experiment (see #1), but this time for keeps. Paragraph 1 of the purchasing agreement reads innocuous enough: “1. Once the market price is determined, I am obliged to buy …”. The instructor takes the signed purchasing agreements, goes home, and computes the demand curve (using regression).At the beginning of the monopoly lecture, tell them that you are the Coke-monopolist (assume AC=MC=50� or whatever the instructor’s cost is), and now you charge according to MR=MC and the instructor is off to the lecture.
Class size: 20 and up
Time: One class-period
Variations: None indicated
See also: Monopoly games

 

Game: #9
Course: Micro
Level: Principles and up
Subject(s): Oligopoly
Objective: To illustrate the interdependence of oligopolistic decision-making
Reference and contact: Brauer, Jurgen. “Oligopoly Game.” Mimeo, Augusta State University, 1994a.; jbrauer@aug.edu [original source unknown, via U. of North Carolina]
Abstract: Students are divided into small management teams (3 or 4 students). A demand schedule for the entire market is provided as is a simple cost-function (where, for simplicity, ATC=MC throughout the entire output range). The objective is for firms to make profit. The game is played over several trading rounds. Give students five minutes to make their first output decision. The instructor collects the firms’ decision and writes the sum of quantity produced (supplied) on the board. From the given demand schedule, the market price can now be read, hence revenue per firm, and their profit or loss. Profit-leaders will usually jeer and try it stay on top in the subsequent trading rounds.Over subsequent trading rounds, students will note that their profit is decidedly influenced not only by how much their own firm produces but also by how much the other few firms produce, thus generating interdependency.
Class size: 12 and up to 40 or 50; larger classes can be divided into different oligopolies, playing games independent of one another; you will need one student assistant per oligopolistic industry for large classes.
Time: In a fifty minute class-period, you will usually be able to play about five rounds or trading days and have time for discussion.
Variations: (a) As the game players become familiar with the game, maybe with trading day two or three, the game coordinator (the instructor) can permit the teams to collude with one another and coordinate output plans. Teams are free to coordinate output levels, but are not required to honor their agreements. At minimum output levels, the game reverts, of course, to a monopoly solution, but offers incentives for ‘cheating.’ (b) If the game goes well, permit mergers with a specified profit/loss sharing arrangement (you may need to expand the trading day to five minutes to allow time for negotiation). (c) If the game goes really well, permit acquisition (out of accumulated profit or debt-financed, i.e., out of expected, future, profits). Note that a firm with low profitability could end up winning the game by negotiating a high buy-out price. In practice, not all acquiring firms do well.
See also: Oligopoly games

 

Game: #10
Course: Micro
Level: Principles and up
Subject(s): Game theoretic oligopoly/information in the marketplace
Objective: “… to illustrate some of the difficulties involved in price coordination (collusion) under circumstances of imperfect competition” (Hemenway, 1987, p. 727).
Reference and contact: Hemenway, David, Robert Moore, and James Whitney. “The Oligopoly Game.” Economic Inquiry, 25, Oct. 1987, pp. 727-730; contains copy for class instructions; moore@oxy.edu ; whitney@oxy.edu
Abstract: Students are given the following pay-off matrix:

 

Other students
Compete Collude
You Compete 10 40
Collude 0 20

 

At a snap count, all students raise either an open hand (signaling to compete) or a fist (collude). If more than half the students vote for “compete,” then “compete” wins, and each student records his/her score (and vice versa when “collude” wins). Play six rounds. If students vote to “compete” in all six rounds (the usual outcome), the highest possible score is 60 points. And here’s the catch: a grade will be assigned to each student, based on the points made. >100=A+; 90-100=A; 80-89=B; 70-79=C; 60-69=D; <60=F. Thus, all students will receive a grade of D or worse.

After the initial shock, let students play a second round of six votes. Now they start down the collusion road, until some student figures out that cheating “pays,” (voting for “compete,” when the others vote for “collude” gets you 40, rather than a mere 20, points), where after collusion usually collapses.

Finally, you may tell students, after the fact, that the “grading” was merely a device to get them to take the game seriously.

Class size: 15 to 70
Time: 15 to 45 minutes
Variations: (a) change the pay-offs to make it easier or more difficult to get a certain grade. For example, if >120=A+ is required, then 6 x 20 is not enough for an A+ anymore. Hence, the group needs to designate ‘cheaters’ (who get 40 points) and change the cheaters in each round (bid-rigging). (b) Go from open eyes to closed eyes to shut of all communication and see how the outcome changes.
See also: Oligopoly games

 

Games Economists Play: Games 11 – 20

Game: #11
Course: Micro
Level: Principles and up
Subject(s): Oligopolistic interdependence
Objective: To demonstrate interdependence
Reference and contact: Ray, Margaret A. “Oligopoly and Interdependence in the Classroom.” Classroom Expernomics, 2(2), Fall 1993, pp. 1-2, or contact Dr. Margaret Ray; Department of Economics; Mary Washington College; Fredericksburg, VA 22401-5358; mray@mwc.edu
Abstract: Explain the general idea of a payoff matrix. Randomly pair students. Write the following payoff matrix on the board (or a variation thereof):

 

Your Choice
A C
Your Partner’s Choice A You: F
Partner: F
You: F Partner: A
C You: A
Partner: F
You: C Partner: C

 

Ask students in the pairs to choose a grade (incommunicado, of course), write it down, and hand it in. The dilemma of lack of information, or having to infer information about the partner becomes immediately apparent. This can then be linked to the prisoner’s dilemma and other games and/or to antitrust regulations, to international cartels (that can legally communicate), and so on.

Class size: Small and up
Time: Half a class period and more as desired
Variations: Itself a variation on #10 discussed above; other variations include permitting information, varying group size (say, to 3, requiring a three-dimensional payoff matrix), changing the payoffs, etc.
See also: Oligopoly games

 

Game: #12
Course: Micro; development economics; international economics (depending on variation)
Level: Principles and up (depending on variations used)
Subject(s): Endowments/market exchange/wealth distribution
Objective: “This simulation illustrates three issues: (1) the potential of market exchange to generate mutual welfare gains; (2) the role of unequal financial endowments in affecting market opportunities; and (3) the impact of differences in individual skills, effort, and creativity on the observed distribution of wealth” (Williams, 1993, p. 325)
Reference and contact: Williams, Robert B. “Market Exchange and Wealth Distribution: A Classroom Simulation.” Journal of Economic Education, 24(4), Fall 1993, pp. 325-334, or contact Dr. Robert Williams; Department of Economics; Guilford College; Greensboro, NC 27410; bwillia2@guilford.edu
Abstract: Students are randomly placed into ‘poor,’ ‘middle class,’ and ‘wealthy’ groups. The initial endowment for each group are differently colored M&M candies. Each color represents a different value (from Brown=1 point to Green=10 points). The total endowment across the groups is distributed 1:2:3.Students are given 5 to 7 minutes to freely trade their M&Ms with one another, within or across their wealth group. The incentive for wealth accumulation is that accumulating the 3rd M&M of a color increases the value of the portfolio, i.e., the marginal value of the 3rd M&M of a color is higher than the inframarginal values, or values of the 1st and 2nd M&Ms.

Students are provided with a handout detailing the value of each M&M, to record their trades, and to compute the value of their portfolio after each trade. Time permitting (50 or 75 minute class period), students debrief themselves, and then play a second and perhaps a third round.

Depending on the topic at hand, the instructor may use the game to illustrate a number of economic concepts relating to pareto optimality, mutually beneficial exchange, the impact of initial wealth endowment, the influence of students ‘animal spirits’ and intuitive grasp of trading opportunities on wealth accumulation, the difference between absolute and relative poverty, the idea of charity (one student gave some M&Ms away to the ‘poor’), and so on.

Class size: Small (can be adapted to larger classes)
Time: 50 to 75 minutes
Variations: (a) make the initial endowment more or less skewed to reflect initial income distribution in different countries; (b) let the groups represent countries rather than income-classes within a country.
See also: Wealth games

 

Game: #13
Course: Micro
Level: Principles and up
Subject(s): Preferences for Income Distribution/Lottery/Rawls
Objective: To investigate “how much income redistribution individuals desire in society with random differences in individual incomes” (Beck, 1992, p. 2)
Reference and contact: Beck, John H. “An Experimental Test of Preferences for the Distribution of Income.” Classroom Expernomics, 1(1), Spring 1992, pp. 2-3, or contact Dr. John H. Beck; School of Business Administration; Gonzaga University; Spokane, WA 99258; beck@jepson.gonzaga.edu
Abstract: The game consists of three parts with the same information but different rules for each part. The information consists of a handout with three columns: (1) lettered A to O; (2) labeled ‘odd’ with payoffs ranging from A=$25 to O=$7.08; (3) labeled ‘even’ with payoffs ranging from A=$0 to O=$7.08.In part A, students circle a letter in column (1) indicating the desired payoff row. Once the sheets are signed and handed in, a die is rolled. If it lands on an odd number, students get the payoff in the odd-column; if it lands on an even number, students get the payoff of the even-column. The ‘higher’ the letter (A is highest, O is lowest), the more risk the student takes (A-odd: $25; A-even: $0), the ‘lower’ the letter, the more risk-averse is the student (O-odd: $7.08; O-even: $7.08). Payoffs are not publicly announced.

In part B, the same procedure is followed, except that a die is rolled for each individual in class and the potential payoff for that individual is publicly announced. Then all papers are put in a bowl and only one is drawn at random to determine the actual individual payoffs for the entire class.

In part C, the entire class must agree (within 15 minutes or else the payoff is $0) which payoff-row to circle, then a die will be rolled separately for each individual to determine an ‘odd’ or ‘even’ payoff for that individual.

In all parts, payoff-transfer payments are not permitted.

Class size: Small to large
Time: One class period
Variations: None indicated
See also: Wealth games

 

Game: #14
Course: Micro
Level: Principles and up
Subject(s): Public choice/industrial organization/rule-governed behavior
Objective: To discover how the structure-conduct-performance (or: rules-behavior-outcome) triplet functions, as the structure (i.e., the rules of the game or laws of society) are changed.
Reference and contact: Goodman, Frederick L. and Robert Parnes. [“The Marble Game.”] Copyrighted by Frederick L. Goodman and Robert Parnes; School of Education; University of Michigan, 1973; description received via Dr. Kurt Schaefer; Department of Business and Economics; Calvin College; Grand Rapids, MI 49506; schk@legacy.calvin.edu
Abstract: This is a marble game, simulating a small society including legislative, executive, and judiciary bodies and many other players in society (jailers, bankers, insurance, lawyers, etc.), depending on the class size. The game-purpose is to obtain a job (either private or public) and to accumulate survival marbles. The game contains “natural laws,” overseen by the GOD (Game Overall Director, i.e., the instructor), and “social laws,” made by the rule-makers in the game. Natural laws cannot be broken; social laws can, and dealing with that is subject to the laws the game-society determines. During the course of the game, the social laws can be changed and the dynamics and complexity of the game unfolds from there on.Whereas the game is not specifically designed for the teaching of an economic principle, it does relate to matters economic and serves a number of pedagogically useful functions: (a) as a powerful motivator; (b) to keep the totality of interactions in mind (general, rather than partial, equilibrium aspects); and (c) to help students experience how rules help determine behavior or shape incentives to achieve desired outcomes. Additionally, the game is flexible enough to be put through the paces from relatively simple to extraordinarily complex; to be played but once, or to be played repeatedly during a quarter or semester at increasing complexity.
Class size: 8 to 50
Time: 2 hours for a basic run (however, to set up the game for the very first time is fairly time-intensive; perhaps students can earn extra credit to do the set-up)
Variations: Numerous to endless; up to the rule-makers and the GOD.
See also: Institutions games

 

Game: #15
Course: Micro
Level: Principles and public finance
Subject(s): Voting paradox/medium voter/cyclical majority
Objective: Time-effective games to illustrate the voting paradox
Reference and contact: Sulock, Joseph M. “The Free Rider and Voting Paradox ‘Games‘.” Journal of Economic Education, 21(1), Winter 1990, pp. 65-69, or contact Dr. Joseph M. Sulock; Department of Economics; University of North Carolina; Asheville, NC; jsulock@unca.edu
Abstract: First game: Students are asked to preference rank three recently covered topics (say, the social security system, corporate income tax, and food stamp program) from high (A) to low (C).Second game: students are asked to preference rank the number of exams they’d like to have in the class, either 3, 4, or 5.

In either game the vote is secret, ballots are collected and tabulated in class. Under majority-rule with two rounds of voting, one can now play through the options for game one: A against B; B against C; and A against C. In twelve times of playing, two classes actually produced a cyclical majority effect! In the other cases, the order of voting determines the outcome.

For game two, the classes have generated rankings of 3-4-5, 5-4-3, and 4-5-3, but never 5-3-4 and 3-5-4, situations in which both extremes (i.e., 3 and 5) are preferred to the middle option (i.e., 4).

Playing both games can be instructive because the ‘exams’ vote deals with cardinal extremes, whereas the ‘topics’ vote doesn’t (it is unreasonable to say that, e.g., the food stamp topic is an ‘extreme’ preference).

Class size: Small
Time: 15 to 20 minutes
Variations: None indicated
See also: Public goods games

 

Game: #16
Course: Micro
Level: Principles and public finance
Subject(s): Free-rider problem
Objective: Time-effective game to illustrate the free rider problem
Reference and contact: Sulock, Joseph M. “The Free Rider and Voting Paradox ‘Games’.” Journal of Economic Education, 21(1), Winter 1990, pp. 65-69, or contact Dr. Joseph M. Sulock; Department of Economics; University of North Carolina; Asheville, NC; jsulock@unca.edu
Abstract: “The students are instructed that they may ‘contribute’ any amount of money from $0 to $10. I explain that I will increase the amount collected by 20 percent, and the resulting total will be divided equally among all class members (but not the instructor). Students are allowed to interact with one another regarding the amount each will contribute before the contributions are made. However, at the ‘moment of truth,’ no interaction is permitted, and anonymity is guaranteed” (Sulock, 1990, p. 66).Dr. Sulock explains that a typical contribution ranges from $1.25 to $1.75 per student, and that the instructor can draw a number of useful lessons: (a) the optimal contribution, of course, would have been $10. Thus, each student’s contribution (output) is economically inefficient; (b) economically, too little has been ‘produced’ (contributed) and that is the crux of the free-rider problem; (c) an efficient level of ‘production’ (contributions) could be achieved through taxation (an involuntary contribution); (d) if the group were smaller, a more efficient level of contributions might have emerged which is why, e.g., fire and police services in very small communities do function on the basis of voluntary contributions, rather than involuntary ones (taxes); (e) each student’s contribution generates externalities (this game allows to link the topics of public goods and externalities).

Dr. Sulock lets classes play for real money. Usually around 50 percent of any one class free-rides totally (i.e., a contribution of $0). Repeating the experiment in the same class often results in all contributions being $0!

Class size: Any size (Dr. Sulock’s classes usually range between 15-20 students)
Time: 15 to 20 minutes
Variations: None inidcated
See also: Public goods games

 

Game: #17
Course: Micro
Level: Principles and public finance
Subject(s): Public goods/free-riding
Objective: To teach the concepts of free-riding/public goods/property with a minimum time requirement
Reference and contact: Leuthold, Jane. “A Free Rider Experiment for the Large Class.” Journal of Economic Education, 24(4), Fall 1993, pp. 353-363, or contact Dr. Jane H. Leuthold; Department of Economics; University of Illinois; Urbana-Champaign, IL 61801; leuthold@uiuc.edu
Abstract: Each student is provided with the following information: “You have one hundred (hypothetical) dollars to invest in one of two assets. Asset A pays a fixed return of 5 percent on your investment. Asset B pays a return of 10 percent on the total class investment, to be divided equally among all students in the class. So, for example, if the class decides to invest $1,000 in Asset B, each of [e.g.,] seventy students in the class will receive a (hypothetical) return of $1.43 (1/70th of 10% of $1,000) regardless of his or her investment in the asset. You may divide your money between the two assets in any way you choose. How much do you want to invest in: Asset A ________? Asset B _______? Total: $100.” Then the form also asks for some demographic information (age, sex, party affiliation, etc.).The “game” is conducted at the end of a lecture period. Students are not to communicate with one another. Prior to the next lecture, the instructor or an assistant compiles the results for display and discussion. Pedagogically, it is important not to mention anything about the free-rider concept until after the game. Students can compute their own free-rider index (amount invested in asset A divided by total investment of $100) and compare that to the class-index (average for the class already known to the instructor). Let students calculate their own individual return on investment as well (from private asset A and joint asset B).

Next, select a small group of students (perhaps only 3), invite them up front, and let them replay the game where they may freely discuss investment strategies with one another (usually, they will all invest only in asset B, thus maximizing their joint returns). This leads to a discussion of information and group size and contributions to or fund-raising efforts of non-profit organizations (such as public radio).

Finally, share the free-rider index by demographic breakdown with the class (do women behave differently than men; etc.)

Class size: Large (200+)
Time: Less than one class period
Variations: See Hoaas and Drouillard (1993)
See also: Public goods games

 

Game: #18
Course: Micro
Level: Public finance (but also useable in principles)
Subject(s): Public goods
Objective: To teach the concepts of public goods provision
Reference and contact: Leuthold, Jane. “A Public Goods Experiment for the Classroom.” Journal of Economic Education, 18(1), Winter 1987, pp. 58-65, or Dr. Jane H. Leuthold; Department of Economics; University of Illinois; Urbana-Champaign, IL 61801; leuthold@uiuc.edu
Abstract: Each pair of students is given a payoff matrix for jointly picking a number (0, 1, 2). For example,

 

Number A’s payoff B’s payoff
0 0 0
1 -1 3
2 -4 4

 

A is the “controller” who will offer to make a number available. B can concur or reject. A and B may bargain over any side payments B is to make to A for A to make a number available. Unknown to the students, the number represents the number of units of a public good for which A pays (hence the negative payoff) and on which B free-rides (hence the positive payoff). After the bargaining, the instructor supplies marginal cost information for the public good and total surplus is calculated.

The experiment consists of four variations with different payoff matrices. In experiment I the players have identical preferences but only know their individual payoffs; in experiment II players have different preferences and know only their own payoffs; in experiment III players have identical preferences and know each other’s payoffs; and in experiment IV players have different preferences and know each other’s payoffs.

The results are that with “full information” (about preferences), students are more likely to choose the optimal number of public good units than under “partial information.” Students learn about the public goods provision problem, about bargaining, about free-riding, about the importance of group size and differential preferences.

Class size: Small to large (pairs of students; but large numbers of pairs might need supervision by student volunteers)
Time: 30 minutes; 50 minutes with discussion
Variations: Vary the group size beyond two players; find a way for anonymous bargaining to eliminate one-on-one peer pressure and see how the outcome changes.
See also: Public goods games

 

Game: #19
Course: Micro
Level: Intermediate and up (perhaps principles, too)
Subject(s): Pollution rights trading
Objective: Students often have trouble accepting, let alone understanding, the concepts of pollution rights and “optimal” pollution levels. The game teaches them that they themselves, like it or not, will arrive at that optimal level!
Reference and contact: Nugent, Rachel. “Pollution Rights Trading Game.” Classroom Expernomics, 2(2), Fall 1993, pp. 3-5, or contact Dr. Rachel Nugent; Department of Economics; Pacific Lutheran University; Tacoma, WA 98447
Abstract: Divide the class into several industries (say, software, pulp mill, steel mill). For simplicity, only one polluting substance is considered. All industries are provided with a table detailing current output, current emission, current profit, marginal cost of cleanup per unit of pollution (a constant cost for simplicity), permissible emission levels, a limited number of tradable permits, and cost information on two options: (a) pay for cleanup and (b) reduce output. A third option is to trade the permits at prices the students are to establish as they trade within a given time-period. [Nugent (1993) contains a sample table with data and optimal solutions.]
Class size: Small
Time: One or more class periods
Variations: Play several rounds; change permissible emission levels; reduce number of permits; and so on.
See also: Externality games

 

Game: #20
Course: Micro
Level: Upper-division finance/economics
Subject(s): Money and banking
Objective: To teach the inverse relation between interest rates and bond prices
Reference and contact: Gillette, David. “Bond Markets in Money and Banking.” Classroom Expernomics, 2(1), Spring 1993, p. 2, or contact Dr. David Gillette; Division of Social Sciences; Northeast Missouri State; Kirksville, MO 63501; ph: 1-816-785-4334; gillette@truman.edu
Abstract: “Bond buyers (households with money to lend) have endowments of money that they can either leave in the bank and earn next to nothing on, or they can try and buy higher yielding bonds in the market. Bond sellers (firms with investment projects to finance) begin the game with an option to issue a bond on which they would have to pay some outrageous interest rate. Both buyers and sellers are given reservation interest rates that, as part of the experiment, they must convert into dollar prices. All bidding is conducted in prices, not interest rates. Bonds may be either zero-coupon or interest bearing. The buyer with the highest average yield after the final trading period and the seller with the lowest average borrowing costs [win]. Since they are required to bid in dollar prices yet win according to average interest rates, this version of the [double oral auction] experiment has been successful in driving home the inverse relationship students often find so difficult to grasp” (Gillette, 1993, p. 2).
Class size: Not indicated
Time: One class period
Variations: None indicated
See also: Money games

 

Games Economists Play: Games 21 – 30

Game: #21
Course: Micro
Level: Graduate?
Subject(s): Unions/Labor-Management negotiations
Objective: Costs of negotiating are different for each party
Reference and contact: D.A. Lax and T.T. Weeks; Harvard Business School 1993/94 Teaching Catalog; Order number 9-186-141 Case (Gen Exp), phone: 800-545-7685; http://www.hbsp.harvard.edu
Abstract: “This game is a highly structured exercise in labor-management bargaining. If union and management cannot reach agreement within two days, then the union will strike. The costs of a strike are not the same for the two sides. Similarly, the cost of a settlement to management differs from its benefits to the union. Union and management players frequently feel that they are more powerful, hold out, endure a strike, and do poorly relative to other players.”
Class size: Unknown
Time: Unknown
Variations: Unknown
See also: Input market and Bargaining games

 

Game: #22
Course: Micro
Level: Graduate?
Subject(s): Game theory/externalities/government regulation
Objective: Students come to see that joint gains must be created and divided and that the tension between competitive and cooperative urges often lead to inferior agreements.
Reference and contact: D.A. Lax and T.T. Weeks; Harvard Business School 1993/94 Teaching Catalog; Order number 9-186-125 Case (Gen Exp), phone: 800-545-7685; http://www.hbsp.harvard.edu
Abstract: “A negotiation exercise between Riverside Lumber Co. and the Division of Environmental Conservation about reducing the effects of effluent discharge in a river. Students are assigned to a role and receive confidential information including a scoring system detailing the costs and benefits of various proposals. Though their interests conflict, joint gains beyond simple agreement can be found. Students come to see that joint gains must be created and divided and that the tension between competitive and cooperative urges often lead to inferior agreements. Means for managing this tension can then be discussed. This game can be used as a complex example of bargaining with incomplete information.”
Class size: Unknown
Time: Unknown
Variations: Unknown
See also: Externality games

 

Game: #23
Course: Micro
Level: Graduate?
Subject(s): Externalities/Marginal Cost Pricing/Tradable Pollution Allowances
Objective: Designed to teach students about the trade-offs faced by firms exploring alternative approaches to complying with pollution control regulations. The setting is the U.S. electric utility industry in 1993.
Reference and contact: W. Emmons; Harvard Business School 1993/94 Teaching Catalog; Order number 9-793-072 (Exercise), phone: 800-545-7685; http://www.hbsp.harvard.edu
Abstract: “In accordance with the provisions of the 1990 Clean Air Act, coal-burning utilities must lower their emissions of SO2 (sulfur dioxide) significantly by 1995, and then reduce their emissions by an additional 50% by the year 2000. In this stylized negotiation each utility has the option of complying with the regulations through one of three methods: 1) by installing pollution control equipment (‘scrubbers’); 2) by substituting high sulfur coal; and/or 3) by purchasing tradeable SO2 allowances from other firms that overcomply with the emission control legislation. Not only must each utility reduce its emissions by a different amount, but the costs faced by each firm with respect to scrubbing and fuel switching differ as well. Also, assumptions relating to the state regulatory environment differ across negotiating groups. Negotiations take place in groups of four utilities and separate scenarios are available for three distinct groups. (See Supplements).”
Class size: Unknown
Time: Unknown
Variations: Unknown
See also: Externality games

 

Game: #24
Course: Macroeconomics, Money and Banking
Level: Principles and up
Subject(s): Fiat money/medium of exchange/introduction to the money chapters
Objective: To teach students that and how fiat value (without intrinsic value) becomes valuable
Reference and contact: Fried, Harold O. and Daniel Levy. “Beans as a Medium of Exchange.” Classroom Expernomics, 1(1), Spring 1992, p. 4. and Levy, Daniel and Mark Bergen. “Simulating a Multiproduct Barter Exchange Economy.” Economic Inquiry, 31, April 1993, pp. 314-321.
Abstract: In Levy and Bergen, the class is divided into small groups of 2-3 students each. Each group is supplied with a basket containing food items and utensils, but not each basket contains both. The items in each basket make for an incomplete meal but the total amount of food distributed is enough to feed the entire class. Students are allowed to make whatever trade they desire; the only restrictions are that trades based on credit are not allowed and unused items must be returned to the instructor. Students record their initial endowments, final consumption bundles, and all trades on a simple form. After all trades have been made, the instructor leads the class in a discussion focusing on the properties of barter exchange relative to monetary exchange.Fried and Levy is identical except that some baskets contain some beans and there are two trading periods. At the end of period one, each group has to pay a previously announced ‘tax’ in the form of beans. Before play, it is also announced that at the end of period two, another tax is due, but that the size of that tax will only be announced at the beginning of period two. Students may not eat until the end of period two. Unsurprisingly, beans obtain value as a medium of exchange.
Class size: Small, adaptable to large
Time: One class period
Variations: None indicated
See also: Money games

 

Game: #25
Course: Macro
Level: Principles and up
Subject(s): Rational expectations
Objective: To introduce “the concepts of rational and adaptive expectations, the Lucas supply curve, the natural rate hypothesis, and random supply shocks” (Peterson, 1990, p. 76)
Reference and contact: Peterson, Norris A. “A Rational Expectations Experiment.” Journal of Economic Education, 21(1), Winter 1990, pp. 73-78, or contact Dr. Norris A. Peterson; Department of Economics; Pacific Lutheran University; Tacoma, WA 98447; petersna@plu.edu
Abstract: The class is divided into 6 teams of students, each representing a supplier. Each team is given a handout that lists absolute price increases for each firm during the (fictitious) last eight time periods. The handout also lists the average price increase across all six firms (randomly drawn from a normal distribution with mean=5 and standard deviation=2.5). Thus, firms with below average price increases should consider lowering production, firms with above average price increases should consider expanding production, and firms with average price increases should neither expand nor contract production.Two practice rounds (time periods 9 and 10) are played. Each team is given a card that lists the absolute price increase for its firm only. The teams have to decide whether to expand, contract, or leave production unchanged (signaled by “+,” “-,” and “0” cards). Unknown to the students, the mean is again set at 5, with a standard deviation of 2.5. Based on the ‘last’ eight rounds, typically the teams’ “+”s and “-“s even out, so that aggregate supply stays unchanged.

For the first ‘real’ round (time period 11), the average price increase is changed, unexpectedly and unknown to the students, to 8 percent. But on the basis of the past 10 rounds and with teams only knowing their own firm’s price increase, all six firms will typically expand production, thus increasing aggregate supply. By round 12 (mean=8 again), teams begin to show adaptive expectations. So, for round 13, the instructor changes the mean again (mean=11), catching the teams off-guard yet again, and by round 14, the teams probably adapt once more.

After each round, there’s a bit of discussion permitted among students and instructor. By round 15, you may find students asking for additional information, and the instructor could ‘publish’ past and announced monetary targets (set at mean price plus 2 percentage points). “From this point on [i.e., when a monetary target is published], the teams will be quite accurate in their forecasts of inflation; subsequent rounds demonstrate that the monetary authorities are powerless to influence aggregate supply. Rather, any fluctuations in output are due to random disturbances associated with imperfect correlations between the money supply … and average price increases” (Peterson, 1990, p. 75).

Class size: Sufficient to allow for 6 teams of students (could be adapted for larger classes)
Time: One class period
Variations: None indicated
See also: Monetary policy games

 

Game: #26
Course: Micro
Level: Principles and up
Subject(s): Supply
Objective: To illustrate the differences between sunk and marginal costs.
Reference and contact: Haupert, Michael J. “Sunk Cost and Marginal Cost: An Auction Experiment.” Classroom Expernomics, 3(1), Spring 1994; haupert@mail.uwlax.edu
Abstract: A dollar bill is auctioned off under the following rules. The auction is conducted as an English auction with the highest bidder winning the dollar. All bids are recorded on the blackboard. The winning bidder must pay a price equal to his or her bid. All other bidders must also pay a price equal to their bid, though none of them get the dollar. The auction inevitably leads to a “bidding war” as bidders realize that, if they are not the high bidder, they will “lose” an amount equal to their bid with nothing to show for it. After the auction, the instructor informs the class that he will return the auction proceeds to the class, but they must decide how to divide it up. The resulting discussion among students can lead to an interesting foray into further questions of allocation and fairness.
Class size: Any size.
Time: 15 to 20 minutes.
Variations: Allow students to collude during a bidding round by encouraging communication among students. Instead of requiring all bidders to pay their bids, require only the top two.
See also: Supply and Auction games

 

Game: #27
Course: Micro
Level: Principles and up
Subject(s): Diminishing returns
Objective: Illustrate a production process subject to diminishing returns to the variable input.
Reference and contact: Hazlett, Denise. Economic Experiments in the Classroom. Reading, MA: Addison Wesley Longman, 1999. (Experiment #8); hazlett@whitman.edu
Abstract: Identical to Neral (1993) except that peanut butter and jelly sandwiches are made instead of widgets.
Class size: Any number.
Time: 30 minutes.
Variations: None indicated.
See also: Supply games

 

Game: #28
Course: Micro and Macro
Level: Principles and up
Subject(s): Diminishing marginal returns
Objective: Illustrate a production process subject to diminishing returns to the variable input.
Reference and contact: Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #6); yandell@acusd.edu
Abstract: Identical to Neral (1993) and Hazlett (1999) except that a folded paper factory is the setting.
Class size: 10 to 40 students.
Time: 30 minutes.
Variations: None indicated
See also: Supply games

 

Game: #29
Course: Micro
Level: Principles and up
Subject(s): Ultimatum bargaining
Objective: To illustrate several basic economic principles including the difference between equity and efficiency, marginal analysis, sunk costs, strategic behavior, and opportunity costs.
Reference and contact: Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #2); yandell@acusd.edu
Abstract: Students are paired up and given the task of dividing a fixed sum of money. The Proposer makes a proposal to the Responder, who can either accept or reject the proposal – negotiation is possible. If the proposal is accepted, students earn the amounts specified in the proposal. If the proposal is rejected, each student receives a zero payoff. The game is played for 10 rounds.
Class size: Any number of students.
Time: 30 minutes.
Variations: Instructor could allow players to openly communicate with each other, students could play against an anonymous partner, or substantially higher stakes could be used.
See also: Bargaining games

 

Game: #30
Course: Micro
Level: Principles and up
Subject(s): Market equilibrium
Objective: Demonstrate the convergence toward equilibrium of a simple pit market.
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 76-77). arthur.osullivan@orst.edu ; smsheffrin@ucdavis.edu
Abstract: Simple pit auction market in which students are divided into two equal groups of buyers and sellers and each student is provided with different reservation prices. Students gather at the front of the room and proceed to negotiate trades with each other over a series of periods.
Class size: 8 to 30
Time: 30 minutes.
Variations: Instructor may impose price ceilings, floors, issue licenses to subset of sellers, or divide sellers into domestic sellers and foreign sellers, and some of the foreign sellers are prohibited from selling in the market.
See also: Price system games

 

Games Economists Play: Games 31 – 40

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

 

Games Economists Play: Games 41 – 50

Game: #41
Course: Micro, Industrial Organization
Level: Principles and up
Subject(s): Collusion
Objective: Illustrates the tendency of collusive agreements to breakdown due to competitive behavior.
Reference and contact: Ortmann, Andreas and David Colander. Experiments in Teaching and in Understanding Economics. Burr Ridge, IL: Irwin, 1995. (Experiment #4)
Abstract: Each student faces a decision in which they must either choose “1” or “0” in a secret vote. The payoff to each student depends on their individual choice and the aggregate number of “1s” chosen by the class and is described by the payoff table below.

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
1 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80
0 50 54 58 62 66 70 74 78 82 86 90 94 98 102 106 110 114 118 122 126 130

The first row indicates the number of students choosing the number 1. The second and third rows indicate the payoff to each student depending on whether they chose number 1 or number 0. Thus, choosing 1 is equivalent to colluding and choosing 0 is regarded as cheating. Students are instructed not to talk with one another during the decision making process. Each student records his/her choice on a piece of paper to be collected by the instructor. Not surprisingly, most students tend to choose 0 during this first stage. Students are then given a second chance to make a choice, but this time with the opportunity to openly discuss the decision with other participants. Since decisions are again made by secret ballot, any collusive agreements to choose 1 inevitably break down.

Class size: Any number of students (may require extending the payoff table).
Time: 15 minutes.
Variations: Additional repetitions with or without anonymity can be run depending on class time.
See also: Oligopoly games

 

Game: #42
Course: Micro, Industrial Organization
Level: Principles and up
Subject(s): Oligopoly
Objective: Illustrate the power of game theory in explaining the behavior of oligopolists.
Reference and contact: Seiver, Daniel. “A Simple Game Theory Experiment for Teaching Oligopoly.” Classroom Expernomics, 4(2), Fall 1995, pp. 1-3; seiverda@muohio.edu
Abstract: After presenting a standard prisoner dilemma game to illustrate the elements of game theory, the instructor introduces a 3×3 profit matrix below for an oligopoly pricing game. Team B’s payoff are listed first.

Team A
$10 $9 $8
Team B $10 16, 16 13, 19 9, 22
$9 18, 13 15, 15 12, 18
$8 20, 10 16, 12 13, 14

Three students are chosen to represent each team and given three minutes to choose a price (by writing it down on a piece of paper). The rest of the class is instructed to make a prediction as to the prices chosen by each team. After the choices are revealed the results can be compared to the Nash equilibrium of ($8, $8).

Class size: Any number of students.
Time: 15 minutes.
Variations: None indicated.
See also: Oligopoly games

 

Game: #43
Course: Micro, Industrial Organization
Level: Intermediate and up
Subject(s): Predatory pricing
Objective: To illustrate the strategic implications of predation theory.
Reference and contact: Kleit, Andrew. “Predation in the Classroom.” Classroom Expernomics, 4(2), Fall 1995, pp. 3-4; eokleit@lsuvm.edu
Abstract: Students take on the role of firms as either entrants or incumbents in a multi-period entry game. Incumbents are of two types: they either accommodate entry (“soft” competitors) or prefer predation (“hard” competitors). The identity of each incumbent is unknown to potential entrants. Given this information asymmetry, a soft incumbent will choose to prey on entrants in early rounds so as to not advertise that they are soft. The payoff tables are below (though in the actual instructions to students Kleit prefers to use neutral terms rather than the descriptive terms used below in order to avoid biasing behavior):

 

Soft Incumbents
Accommodate Prey
Entrant Do Not Enter 0, 25 0, 25
Enter 10, 10 -5, -2.5

 

 

Hard Incumbents
Accommodate Prey
Entrant Do Not Enter 0, 25 0, 25
Enter 10, -2.5 -5, 10

 

Students are randomly paired with an opposite type each period and play for 3 or 4 periods. Kleit’s experiments indicate that almost all entrants choose to enter in the first period. Subsequent periods see entry occur against those incumbents who have revealed themselves to be “soft.” After these initial periods, the students are reassigned roles and randomly paired again for a second round of gaming. Most of the soft incumbents then figure that it is profitable to prey in the early periods, thereby discouraging later entry.

Class size: Any number of students.
Time: 75 minutes.
Variations: None indicated.
See also: Oligopoly games

 

Game: #44
Course: Micro
Level: Intermediate and up
Subject(s): Theory of the firm.
Objective: To illustrate the nature of motivation and coordination problems facing the firm.
Reference and contact: Bouchez, Nicole M. “Motivation and Coordination: Experiencing Organizational Dynamics.” Classroom Expernomics, 6(2), Fall 1997, pp. 8-1; bouchez@cats.usc.edu
Abstract: Students are divided into groups of between 5 and 15 players each. Several students serve as monitors. For the coordination game, students are asked to choose a number between 1 and 10 (inclusive) based on the following payoff rule: let LG be the smallest number chosen in team G, let xi LG be the choice of individual I in that team. Student I’s payoff is LG less his deviation di = xi – LG from the team’s choice. In other words, pi = LG – di (= 2LG -xi) are the student’s profits for the period. After all students make their choices, the monitors announce the value of LG for all groups and members calculate their profits accordingly. The pareto efficient equilibrium is for all group members to choose xi = 10; there is no incentive to defect. During the initial periods of play, no communication is allowed among group members, though this restriction is relaxed in latter periods.For the motivation game, the payoff rules are changed. During each period, students must choose either 0 or 1 according to the following payoff rule. Let MG = Sxi be the total number chosen in group G. Player I’s profits are pi = MG – 5xi, where 5xi represents an effort cost. The students write their choices down and the monitors announce the value of MG for each group. The pareto outcome is for all members to choose xi = 1, though now there is an incentive for individuals to defect. Again, the ability to communicate is used as a treatment variable.
Class size: Any size (with a few minor adjustments).
Time: One class period.
Variations: Another treatment variable is to vary the group size during the experiment.
See also: Oligopoly games

 

Game: #45
Course: Micro, macroeconomics, law & economics, managerial economics, industrial organization
Level: Principles and up
Subject(s): Coordination
Objective: Illustrates ideas associated with team production and game-theoretic concepts of Nash equilibrium and Pareto optimality.
Reference and contact: Capra, C. Monica and Charles A. Holt. “Coordination.” Southern Economic Journal, 65(3), January 1999, pp. 630-636; cah2k@virginia.edu
Abstract: Students are divided into groups of various sizes and each student is given two playing cards – one red, one black. Students must simultaneously decide whether to put out “high” effort (by playing a black card) or “low” effort (by playing a red card), with high effort more rewarding but also more costly. The game is structured so that there are two equilibria: one in which all students choose high, and one in which all students choose low. The game is described by the payoff matrix below:

 

Column Player
Row Player Red Black
Red 1, 1 1, 0
Black 0, 1 4, 4

 

Class size: Any number.
Time: 35-45 minutes.
Variations: The instructor can vary the size of the groupings to illustrate the problems or coordination among larger groups.
See also: Oligopoly games

 

Game: #46
Course: Micro, Labor
Level: Principles and up
Subject(s): Labor market discrimination.
Objective: To illustrate economic inefficiencies resulting from discriminatory hiring practices.
Reference and contact: Anderson, Donna M. and Michael J. Haupert. “Employment and Statistical Discrimination: A Hands-On Experiment,” Working Paper, University of Wisconsin-La Crosse, October 1997; ander_dm@mail.uwlax.edu; haupert@mail.uwlax.edu
Abstract: Students play the role of employers who must hire eight workers from a pool of twenty applicants. Applicants differ according to their productivity, which ranges from 0 to 10 units of production. The labor pool contains two types of workers, pink and blue, whose characteristics can be observed at zero cost by each employer. What cannot be observed at zero cost is the actual level of production of each worker. Employers do have, however, summary statistical information concerning the worker pool. Each employer is given a deck of cards, ten of which are pink and ten of which are blue. The productivity of each applicant is written on the back of the cards. The deck is shuffled and represents the order in which the applicants are interviewed. The students are divided into equal numbers of three market types representing different distributions of worker productivity. Three rounds are played. In the first round, the cost of interviewing equals 2 units of production. The second round has a cost of .5 units of production, while the third round has a cost of 2 units of production and a requirement that employers hire an equal number of pink and blue workers.
Class size: Any size.
Time: One class period.
Variations: In order to generate wage gaps, allow employers to pay workers what employers think workers are worth. Another extension is to generate occupational segregation by requiring employers to hire workers into one of two jobs: a low-pay and a high-pay job.
See also: Labor market games

 

Game: #47
Course: Micro, Labor
Level: Principles and up
Subject(s): Reciprocal gift exchange, moral hazard.
Objective: To illustrate the effects of moral hazard as applied to labor markets.
Reference and contact: Morgan, John. “Reciprocal Gift Exchange.” Available at http://faculty.haas.berkeley.edu/rjmorgan/reciproc.htm.
Abstract: Students are divided into equal groups of firms and workers and participate in a two stage game. In stage one, a double auction is used to allocate labor. Each firm can hire only one worker and each worker can only work for one firm. A firm’s profits are equal to 2e – w, where e is the effort level put out by their worker and w is the wage. A worker’s earnings are equal to w – e. In stage two, all employed workers simultaneously and privately choose their level of effort from the set E = {1, 2, 3, 4, 5}. Earnings are then calculated for all and a new period begins. Given the moral hazard conditions, Morgan reports that involuntary unemployment and excess effort by workers is easily exhibited, along with an upward sloping wage-effort profile.
Class size: 10 to 40 students.
Time: 30 – 45 minutes.
Variations: None indicated.
See also: Labor market games

 

Game: #48
Course: Micro
Level: Principles and up
Subject(s): Comparative advantage and trade.
Objective: To illustrate the role of comparative advantage in generating gains from trade.
Reference and contact: Stodder, Jim. “A Simple Experiment of Comparative Advantage.” Classroom Expernomics, 3(1), Spring 1994, pp. 8-10.
Abstract: Students are paired up with one representing the United States and the other Mexico. Each student is provided a graph containing the production possibilities frontier (PPF) between two goods, trucks and computers, for their respective country. The PPFs are drawn such that the US has an absolute advantage in both goods and a comparative advantage in computers and Mexico has a comparative advantage in trucks. Students are then asked to choose any point along his or her PPF that he or she “likes” the best (which represents the point of production/consumption in autarky). Next, each pair is asked to find a trade involving trucks and computers that makes each country better than their initial “best points,” where better off means that a country gets no less of each good and more of at least one good compared to autarky.
Class size: Any size.
Time: One class period.
Variations: None indicated.
See also: International trade games

 

Game: #49
Course: Micro
Level: Principles and up
Subject(s): Comparative advantage and trade.
Objective: To illustrate the role of comparative advantage in generating gains from trade.
Reference and contact: Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #8); yandell@acusd.edu
Abstract: Nearly identical to Game #48.
Class size: Any size.
Time: One class period.
Variations: None indicated.
See also: International trade games

 

Game: #50
Course: Micro, macro, international trade
Level: Principles and up
Subject(s): International trade
Objective: Illustrate the gains from trade and the law of one price.
Reference and contact: Hazlett, Denise. Economic Experiments in the Classroom. Reading, MA: Addison Wesley Longman, 1999. (Experiment #4); hazlett@whitman.edu
Abstract: The class is divided into two double oral auction markets with students taking on the role of buyers and sellers. Each market represents a different country. Initially a trade barrier prevents trading between countries and, consequently, each market generates a different equilibrium price: one with a high price and the other with a low price. In later periods, the instructor announces a “free trade” agreement between the countries and allows trade to take place. The free trade price will ultimately end up somewhere between the no-trade prices.
Class size: 10 to 50 students.
Time: One class period.
Variations: None indicated.
See also: International trade games

 

Games Economists Play: Games 51 – 60

Game: #51
Course: Micro, macroeconomics, International Trade
Level: Principles and up
Subject(s): Multimarket equilibrium, trade, and the ‘Law of One Price’
Objective: Illustrate the effects of inter-market trade.
Reference and contact: Laury, Susan K. and Charles A. Holt. “Multimarket Equilibrium, Trade, and the Law of One Price.” Southern Economic Journal, 65(3), January 1999, pp. 611-621; cah2k@virginia.edu
Abstract: Similar to game #50 except that sellers are eliminated by having the instructor auction off a fixed supply to student buyers in each market. Buyer values are assigned by using the numbered cards from a ordinary deck of playing cards. Buyers submit sealed bids for a single unit with the market price determined by the highest rejected bid. Several trading rounds are played to allow each separate market to converge to equilibrium. In later rounds, a student is selected as a trader from each market (simply remove the lowest value card from each market and the equilibrium price would be unaffected as this would represent the removal of an extramarginal buyer). The traders are given a trading endowment and are restricted to buying only a single unit from the low-price market. Traders will then have the opportunity to buy from the low priced market and resell in the high priced market, thereby establishing the law of one price.
Class size: 10 to 40 students (larger classes can be accommodated).
Time: One class period.
Variations: None indicated.
See also: International trade games

 

Game: #52
Course: Macro
Level: Principles and up
Subject(s): Portfolio diversification
Objective: To illustrate the power of diversification.
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 328-329); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract: Students are offered the chance to participate in an investment game in which the outcome depends on the flip of a coin. The game’s payoff is as follows:

payoff = $10 + $100 [(#heads/#tosses) – 0.5)]

That is, the student receives “$10 but (can) either win or lose additional funds, depending on whether the fraction of heads that comes up exceeds one-half.” The game has an expected return of $10. Students are then asked if they would like to play under (at least) two alternative scenarios: Would you play this game with one toss only? Would you play this game if you could toss 1000 times? The point is that many tosses is equivalent to diversification

Class size: Any size.
Time: Less than one class period.
Variations: None indicated other than the type of questions posed to the students.
See also: Portfolio games

 

Game: #53
Course: Micro, macroeconomics, money and banking
Level: Principles and up
Subject(s): Efficient markets hypothesis
Objective: To teach the efficient market hypothesis to students who misperceive the nature of random events.
Reference and contact: Cooper, David. “Perceptions of Chance and the Efficient Markets Hypothesis: A Classroom Experiment,” Classroom Expernomics, 7(1), Spring 1998, pp. 1-9.
Abstract: Students are presented with several series of answers from true/false exams. They are told that only one of the series is truly random while the others contain predictable patterns. Students are asked to identify the random series. Students who correctly identify the series with no correlation over time receive a small monetary prize. In general, the typical choice is a sequence with moderate negative correlation over time.
Class size: Any number.
Time: 20 minutes to complete the experiment; any remaining time is left for discussion.
Variations: Use contexts that are closer to financial markets, such as having students distinguish real stock charts from fake stock charts.
See also: Information games

 

Game: #54
Course: Micro, health economics
Level: Principles and up
Subject(s): Market efficiency versus equity; moral hazard.
Objective: Illustrate the impact of a third party payment system on the market for health care.
Reference and contact: Gillette, David. “Double Oral Auctions and Health Care.” Paper presented at the Economics Science Association Annual Meeting (November 1994); gillette@truman.edu
Abstract: A double oral auction is used to illustrate the impact of a third party payment system on the market for health care. After a few trading rounds under a basic double oral auction, the buyers are informed that a benevolent dictator will pay 80% of their negotiated purchase price. The experiment allows the student to experience the tradeoffs between market efficiency and equity in the presence of universal health insurance coverage. Students also gain an appreciation for the nature of moral hazard and adverse selection issues.
Class size: 10 and above.
Time: One class period.
Variations: Inform both buyers and sellers of the introduction of a third party payer.
See also: Market intervention games

 

Game: #55
Course: Micro, public finance
Level: Principles and up
Subject(s): Education market with positive externalities
Objective: Demonstrates the problem of underproduction in the presence of a positive externality and the ability of private negotiations to internalize positive externalities.
Reference and contact: Hazlett, Denise. “An Experimental Education Market with Positive Externalities.” Journal of Economic Education, 31(1), Winter 2000, pp. 44-51. hazlett@whitman.edu
Abstract: Students take on the role of either buyers or sellers of education or as interested bystanders. Each buyer can buy up to three units (years) of education subject to diminishing marginal benefit. Each seller can sell as many years of education as they choose at a constant marginal cost. Interested bystanders receive a spillover benefit for each year of education consumed by each buyer. A pit auction trading institution is used. After several periods of merely “standing around,” interested bystanders are encouraged to become involved in the market. If bystanders remain inactive, the instructor can suggest specific strategies such as subsidies to buyers or sellers.
Class size: 10 to 50 students.
Time: One class period.
Variations: Various forms of ‘government intervention’ can be implemented, such as compulsory attendance or price controls.
See also: Externality games

 

Game: #56
Course: Micro
Level: Principles and up
Subject(s): An Experiment in Income Redistribution and Poverty Measurement
Objective: To get students to question the notion of income equality and poverty measures.
Reference and contact: Deitz, Richard. “An Experiment in Income Redistribution and Poverty Measurement.” Classroom Expernomics, 5(2), Fall 1996, 5-6; rmdgsm@rit.edu
Abstract: Each student in class must contribute $1 to a class fund. The sum of the contributions will then be given to a single class member. A small group of students must jointly and unanimously determine who that person will be. The recipient may not share the money with anyone else. The group may use any criteria is so desires — except for chance. Discussions usually focus on questions such as who is most deserving? who is the poorest? who works the hardest? what will the recipient do with the money? Discussion can then be oriented toward how current poverty programs and taxes are administered.
Class size: Limit to 10 actively participating students.
Time: 30 minutes.
Variations: None indicated.
See also: Income distribution games

 

Game: #57
Course: Micro
Level: Principles and up
Subject(s): Pareto-efficiency; equity and efficiency tradeoffs
Objective: Illustrates equity-efficiency tradeoffs, frustration with relative inequality, and interdependence of decision making.
Reference and contact: Peterson, Ken. “Equity and Efficiency in a Game.” Classroom Expernomics, 4(1), Spring 1995, pp. 1-2; ken.peterson@furman.edu
Abstract: Students are told to quietly write down either “�” or “3” on a piece of paper. Each student will receive bonus points equal to the number they wrote down – unless more than three students have written “3” in which case all students will receive zero bonus points. Invariably, more than three students write down “3” so that all students end up with zero points. The instructor points out to the students how wonderful the equal distribution of points is and asks if the outcome was Pareto efficient. In another round, the instructor can reveal names of those choosing the number three by writing names on the blackboard (this may simulate ‘social punishment’ or learning). In still another round, the instructor may encourage students to communicate with each other during the decision process.
Class size: Up to 20 to 30 students.
Time: 30 minutes.
Variations: Smaller class sizes can be accommodated by reducing the critical number of “3s” to two.
See also: Income distribution games

 

Game: #58
Course: Micro, Macro
Level: Principles and up
Subject(s): Balanced budgets and interest group politics.
Objective: To illustrate the common-pool qualities of the budget negotiation process.
Reference and contact: Murphy, Edward. “A Budget Balancing Game.” Classroom Expernomics, 3(1), Spring 1994, pp. 7-8.
Abstract: The instructor provides the latest budget figures by function (education, welfare, defense, etc.) and divides the class into interest groups pertaining to these functions. The entire class must then propose an alternative budget and pass the budget using a majority rule. The class as a whole divides up extra credit points that are based on the size of the budget deficit that is passed: the smaller the deficit, the larger the reward. The share of the total reward to each student, however, depends on how well his or her interest group does. Each interest group receives points for every dollar spent on its favored project and may have points deducted for money spent on certain other projects. Students will attempt to form coalitions in order to secure their favorable votes for their projects.
Class size: Larger than 10.
Time: One class period.
Variations: None indicated.
See also: Fiscal policy and public choice games

 

Game: #59
Course: Micro, public finance, and law & economics
Level: Principles and up
Subject(s): Agendas and strategic voting
Objective: Illustrates how agendas can be manipulated to generate voting cycles and an inefficiently high level of public spending.
Reference and contact: Holt, Charles A. and Lisa R. Anderson. “Agendas and Strategic Voting.” Southern Economic Journal, 65(3), January 1999, pp. 622-629; cah2k@virginia.edu
Abstract: Students take on the role of voters with express preferences over various government ‘projects.’ A deck of ordinary playing cards is used to assign preferences among the voters according to the following predetermined pattern:

V1 V2 V3 V4 V5 V6 V7
Heart
Spade
Heart
Spade
Heart
Club
Heart
Club
Club
Spade
Club
Spade
Club
Spade
Highway
School
Highway
School
Highway Highway School School School

Each student receives two cards: a Heart indicates a preference for a “highway” project (with a value of $300 to the voter); a Spade indicates a preference for a “schooling” project (with a value of $300 to the voter); a Club card has no effect on preferences. Each voter pays a tax of $200 for each project that is funded. Under this setup a voting cycle can be observed in which one project defeats a second, which defeats a third, which in turn defeats the first project. Student voter decisions under different agendas can then be evaluated in terms of strategic voting patterns.

Class size: 7 to 35 students (multiples of 7 with off numbers assigned as pairs).
Time: 30 to 45 minutes
Variations: None indicated
See also: Public choice games

 

Game: #60
Course: Micro
Level: Principles and up
Subject(s): Voluntary contributions experiment
Objective: Illustrate the nature of public goods and free-riding.
Reference and contact: Brock, John. “A Public Goods Experiment for the Classroom.” Economic Inquiry, 29(2), April 1991, pp. 395-401.
Abstract: Students must allocate an endowment of tokens into a private and group account over a number of decision making periods. Each token placed in the private account pays $0.25. Each token placed in the group account pays $0.50 that must then be divided equally among all participants, whether or not any participant contributed to the group account. Contributions to the group account generally fall over the course of the experiment as students discover that free-riding as a dominant strategy.
Class size: Any number.
Time: One class period for experiment and discussion.
Variations: Allow communication among participants during decision making. Vary group sizes or account payoffs.
See also: Public goods games

 

Games Economists Play: Game 61 – 70

Game: #61
Course: Micro
Level: Principles and up
Subject(s):  Public goods provision.
Objective: Illustrate why the government provides public goods and subsidizes other goods that generate positive externalities
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (p. 289); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract: Large classes are divided into small groups of students who have the opportunity to support public education through their voluntary contributions. Each group begins play with a $30 balance. Student groups must decide how much to contribute to the public good. Contributions may not exceed $10 per period. Each dollar contributed to the public good reduces the government’s expenditures on welfare and criminal justice by $3, so the government enjoys budget savings equal to three times the sum of contributions. The government promises to refund the savings equally among all citizens. The experiment is run for five periods.
Class size:  Any size.
Time:  30 minutes.
Variations:  None indicated
See also:  Public goods games

 

Game: #62
Course: Micro
Level: Principles and up
Subject(s): Voluntary contributions experiment
Objective: Illustrate the nature of public goods and free-riding.
Reference and contact: Parker, Jeffery. Economics 201: Instructor’s Laboratory Manual. Reed College, November 1993; parker@reed.edu
Abstract: Virtually identical to Brock (1991), Yandell (1999a), Delemeester and Neral (1995). 
Class size: Any number.
Time: One class period for experiment and discussion.
Variations: Introduce declining marginal returns to both the private and public good which could make both the individual and social optimums interior solutions. Introduce a universal tax which is subject to a majority vote by all participants.
See also: Public goods games

 

Game: #63
Course: Micro
Level: Principles and up
Subject(s): Voluntary contributions experiment 
Objective: Illustrate the nature of public goods and free-riding.
Reference and contact: Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #10); yandell@acusd.edu
Abstract: Virtually identical to Game #59 
Class size: Any number.
Time: One class period for experiment and discussion.
Variations: Introduce declining marginal returns to both the private and public good which could make both the individual and social optimums interior solutions. Introduce a universal tax which is subject to a majority vote by all participants.
See also: Public goods games

 

Game: #64
Course: Micro
Level: Principles and up
Subject(s): Product quality experiment
Objective: To examine the impact of product quality differences on allocative efficiency. 
Reference and contact: Parker, Jeffery. Economics 201: Instructor’s Laboratory Manual. Reed College, November 1993; parker@reed.edu
Abstract: Students are divided into equal numbers of buyers and sellers for a three-part double oral auction. Each buyer is given buyer values for two goods: a low value for a ‘standard’ good and a higher value for a ‘premium’ good. Each seller is given seller costs for two goods: a low cost for the standard good and a higher cost for the premium good. Each trader can only buy or sell one unit of either good in each period. In the first part of the DOA the greatest gains from trade occur only if the premium good is traded. In the second part, the greatest gains from trade occur only if the standard good is traded. In the third part, the greatest gains from trade occur only if some of the standard and some of the premium goods are traded. 
Class size: 10 to 30 students 
Time: One class period
Variations: With larger classes, additional levels of product quality can be introduced. Asymmetric information could be introduced by having the product quality revealed only after the buyer has purchased the product. Also, one could introduce a ‘government’ quality standard in which low quality products are prohibited from trading.
See also: Information games

 

Game: #65
Course: Micro
Level: Principles and up
Subject(s): Imperfect/asymmetric information
Objective: To illustrate the lemons problem involving asymmetric information in a market.
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 327-328); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract: Students play the role of used-car buyers. The market contains plums (high-quality cars) and lemons (low-quality cars). High-quality cars are worth $1200 and low-quality cars are worth $400. Car buyers make a price offer and then roll a pair of dice to determine which type of car they receive. In general, to get a plum one must roll a large number. The instructor uses a formula (based on the number of lemons and plums in the market) to determine whether the buyer has rolled a large enough number for a plum; otherwise, the buyer gets a lemon. Students calculate their earnings based on the difference between the value of the car and the amount offered for it. Play is for three to five periods.
Class size: Any size 
Time: 30 minutes.
Variations: None indicated
See also: Information games

 

Game: #66
Course: Micro
Level: Principles and up
Subject(s): Adverse selection and market failure
Objective: To illustrate how information asymmetries can lead to adverse selection
Reference and contact: Yandell, Dirk. Using Economic Experiments in the Classroom. Upper Saddle River, New Jersey: Prentice Hall, 1999a. (Experiment #9); yandell@acusd.edu
Abstract: Students are assigned the roles of used-car owners and dealers who participate in a posted price market as sellers and buyers, respectively. Each car owner (seller) has one used car to sell and knows whether the car is a lemon or not. Each seller is given a minimum selling (reservation) price for their car. Sellers with a lemon have a reservation price of zero, while sellers with a good car have a reservation price of $1200. Car dealers (buyers) have $3000 to spend on cars. Lemons have a resale value of $500 to the dealers, while good cars are valued at $2500. Dealers, however, do not know which type of car the sellers are selling; they only know that half of all cars sold will be lemons. The market opens with all dealers (buyers) simultaneously revealing their price offers. Car owners (sellers) are then free to sell their cars to any dealer on a first-come, first-served basis. After all trades are completed, the quality of the cars traded are revealed. Additional rounds are played until buyers realize that only lemons are being supplied to the market (and the price has fallen to around $500).
Class size: 10 to 40 students.
Time: 50 minutes.
Variations: Allow sellers to signal the quality of their car by purchasing proof that their car is not a lemon (by paying $100 to the instructor for the right to reveal their car’s quality before a trade takes place).
See also: Information games

 

Game: #67
Course: Micro
Level: Principles and up
Subject(s): Imperfect/asymmetric information and insurance.
Objective: Illustrates the impact of asymmetric information on the market for insurance.
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 328-329); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract: Students are divided into small groups representing bicycle insurance companies. Each insurance company chooses a price at which they will offer bicycle theft insurance. Each insurance group must pay $100 for each insured bike that is stolen. There are two types of bicycle owners: those that have a high probability of bike theft and those that have a low probability of bike theft. The insurance companies cannot distinguish between the two types of bicycle owners, though they know that 20% of all bikes are stolen each year. The instructor provides each insurance company with “a table showing, for each price of bike insurance, how many owners of each type (high probability and low probability) will purchase insurance.” Student insurance groups can then calculate their total revenue, number of bikes stolen, and their replacement cost. The insurance groups earn a profit equal to total revenue minus total replacement cost. The experiment is run for several periods.
Class size: Any number.
Time: Less than one class period.
Variations: None indicated.
See also: Information games

 

Game: #68
Course: Micro
Level: Principles and up
Subject(s): Economics of information.
Objective: To illustrate the impact of imperfect information on consumer choice behavior.
Reference and contact: Netusil, Noelwah R. and Michael Haupert. “The Economics of Information: A Classroom Experiment.” Journal of Economic Education, 26(4), Fall 1995, pp. 357-363; netusil@reed.edu ; haupert@mail.uwlax.edu
Abstract: Students are divided into seven groups, each containing five or fewer members, and asked to rank the quality of various brands of pumpkin pies (or some other suitable experience good). Each group is provided with a different set of information upon which they based their product quality judgments:

Group Information
1 Taste test only
2 Brand name and packaging only
3 Price only
4 Advertising only
5 Taste, then describe
6 Word-of-mouth only
7 Everything but taste test

Group rankings are obtained and written on the blackboard. Next, the identity of the pies is disclosed but not the prices. Each group that does not have price information is asked to briefly explain the basis of its decision. Each group is then asked to guess the relative prices of each brand. When played, in each case, students assumed that the higher quality pies had higher prices. Post experiment discussion can focus on the role of various signals of product quality such as price, brand names, reputation, warranties, and publications (such as Consumer Reports).

Class size: Any size.
Time: 30 minutes.
Variations: Authors note that they did not control for the order in which the goods were judged. This, however, could lead to a discussion of potential order bias.
See also: Information games

 

Game: #69
Course: Micro
Level: Principles and up
Subject(s): Economics of information
Objective: Illustrates the moral hazard problems associated with principal-agent relationships.
Reference and contact: Ortmann, Andreas and David Colander. Experiments in Teaching and in Understanding Economics. Burr Ridge, IL: Irwin, 1995. (Experiment #6); and Ortmann, Andreas and David Colander. “A Simple Principal-Agent Experiment for the Classroom.” Economic Inquiry, 35(2), April 1997, pp. 443-450.
Abstract: A one-sided prisoner’s dilemma game is used to represent the strategic uncertainty where an agent can supply a good at either high quality or low quality, and a principal can either verify the quality at cost or trust the agent. Students are presented the following payoff table. The principal’s (Player 1) payoffs are listed first.

 

Player 1
Don’t Inspect Inspect
Player 2 High Quality 1, 1 0, 0
Low Quality 2, -1 0, 0

 

The class is divided into buyers and sellers by giving each type a different colored piece of paper on which to record their decisions. Each player is given an endowment of one quarter (25 cents). The players are then told to mingle about the room in search of a player of the opposite type. Once located, the two players may discuss the optimal strategy of combination but they must record their choice privately (along with their initials for identification purposes). Each pair then submits their choices to the instructor. The instructor then determines each player’s payoffs according to the matrix above: if the upper left corner is the outcome, give each player an additional quarter; if the lower left corner is the outcome, take the initial endowment from player 2 and give it to player 1, then give player 1 an additional quarter; if the lower right corner is the outcome, take no action. Ortmann and Colander claim that you will see about as much cooperation in the one-sided game as in the more traditional two-sided game.

Class size: Any even number of students.
Time: 30 – 45 minutes.
Variations: The game could be repeated using different information conditions or the reputations of players could be kept secret or revealed.
See also: Information games

 

Game: #70
Course: Micro
Level: Principles and up
Subject(s): Common pool resources and cartels.
Objective: Illustrates the coordination problems associated with common pool resources and cartels. 
Reference and contact: Ortmann, Andreas and David Colander. Experiments in Teaching and in Understanding Economics. Burr Ridge, IL: Irwin, 1995. (Experiment #5)
Abstract: The instructor announces to the class that he has a sum of money that will be auctioned off. Bidders must submit sealed bids. The highest bidder wins the auction and receives a payoff equal to the sum of money minus his or her bid. If there is a tie for the highest bid, those students will share the difference between the sum of money and the value of their identical bid. Students are given five minutes to jointly discuss an optimal strategy. Students should be able to recognize that the optimal group strategy is for everyone to bid zero. However, since each bidder makes his or her bid privately, the individual incentives are high enough to lead to an overall low payoff.
Class size: Any number.
Time: Less than one class period.
Variations: None indicated.
See also: Common pool and oligopoly games

 

Games Economists Play: Games 71 – 80

Game: #71
Course: Micro
Level: Principles and up
Subject(s): An experiment on externality rights
Objective: Illustrate issues associated with property rights, externalities, and the Coase Theorem.
Reference and contact: Stodder, Jim. “An Experiment on Externality Rights.” Classroom Expernomics, 5(1), Spring 1996, pp. 5-7; stodder@mstr.hgc.edu
Abstract: Students are paired up and assigned the role of a BarBQer or a Neighbor. A BarBQer likes to cook (and create smoke) while a Neighbor doesn’t like to breathe smoke. Half the class is informed that Neighbors have the right to zero smoke, while the other half is informed that BarBQers have the right to maximum smoke. The payoffs to each person depends on the level of smoke:

 

Smoke From BarBQ 0 1 2 3
BarBQer’s Total Value $0 $30 $50 $60
Neighbor’s Total Value $35 $30 $20 $0
BarBQer + Neighbor Value $35 $60 $70 $60

 

Each pair proceeds to negotiate a satisfactory bargain.

Class size: Any number.
Time: 30 – 45 minutes.
Variations: Introduce a payoff structure that has two peaks (say, by making Neighbor’s value equal $75 when smoke is zero) and observe the difficulties this presents private negotiation. Also, you can easily demonstrate a ‘public’ externality by having two large groups that must negotiate over the appropriate level of smoke.
See also: Externality games

 

Game: #72
Course: Micro, law & economics, public finance
Level: Principles and up
Subject(s): Coase Theorem
Objective: Illustrate issues associated with property rights and the Coase Theorem.
Reference and contact: Delemeester, Greg and John Neral. Classroom Experiments: A User’s Guide. Boston: Houghton Mifflin, 1995. (Experiment #16)
Abstract: Students are paired together in order to jointly select a number in which the payoffs to each are inversely correlated.

 

Number A’s Payoff B’s Payoff
0 $0.00 $12.00
1 4.00 10.00
2 6.00 6.00
3 8.00 4.00
4 9.00 2.00
5 10.00 1.00
6 11.00 0.00

 

At the beginning of each decision making period, one of the students is randomly chosen to be the ‘controller.’ The controller may unilaterally choose the number thereby ending the decision making process. On the other hand, the other participant may attempt to influence the controller by offering to pay part or all of her earnings to the controller. The pareto optimal outcome is for number 1 to be chosen. The ‘controller rational’ outcome would have the controller receive the lion’s share of the joint $14. A frequently observed alternative outcome is for an equal split of the $14.

Class size: Any number.
Time: 30 – 45 minutes.
Variations: None indicated.
See also: Coase games

 

Game: #73
Course: Micro
Level: Principles and up
Subject(s): Market for pollution permits.
Objective: Demonstrate the role of tradable permits in reducing the cost of pollution abatement.
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 311-312); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract: The class is divided into small groups of students (3 to 5) representing paper firms. Each firm is provided data about the firm’s production costs as it depends on the amount of waste generated. Each firm receives three pollution permits and is able to buy or sell one permit per trading period. Firms attempt to maximize their profits: profit = (price of paper – production cost) + (revenue from permit sold – cost of permit purchased). Play occurs over five trading periods. During periods four and five, several students are selected to represent environmental groups and are given a fixed amount of money in order to buy permits so as to reduce as much waste as possible.
Class size: 10 to 50. 
Time: One class period.
Variations: None indicated beyond the introduction of the environmental groups in periods four and five
See also: Externality games

 

Game: #74
Course: Micro, public economics, environmental economics
Level: Principles and up
Subject(s): EPA-Style auction of pollution permits 
Objective: To demonstrate the cost savings from using a market-based approach versus requiring an across-the-board cut in emissions. 
Reference and contact: Hazlett, Denise. “An EPA-Style Auction of Pollution Permits.” Classroom Expernomics, 4(1), Spring 1995; hazlett@whitman.edu
Abstract: Students take on the roles of polluting electric utilities faced with a pollution permit system. Each polluter has information on their own firm’s marginal product of output, marginal cost of production, marginal cost of pollution abatement, and the market price of electricity. Each utility initially emits 500 tons of pollution. A permit system is introduced in which each polluter must obtain a permit for every 100 tons of emissions. The total number of permits available is such that industry emissions will be cut by 60%. Each utility initially receives two permits with the remaining permits auctioned off by the EPA (instructor). After all permits are distributed, a secondary market in permits is opened. Students keep track of their transactions and profits for later discussion.
Class size: 10 students (with larger numbers handled through teams).
Time: One class period.
Variations: A group of students can be assigned the role of an environmental group that is able to buy and ‘retire’ permits.
See also: Externality games

 

Game: #75
Course: Micro
Level: Principles and up
Subject(s): Environmental and natural resource economics
Objective: To illustrate the over-harvesting tendencies of a common-property resource.
Reference and contact: Hazlett, Denise. “A Common Property Experiment with a Renewable Resource.” Economic Inquiry, 35, October 1997, pp. 858-861; hazlett@whitman.edu
Abstract: Students jointly own a renewable resource and must make harvesting decisions over a number of periods under three treatments. “A plate of M&Ms serves as the resource. At the beginning of the first period the plate holds a number of M&Ms equal to 10 times the number of students in the class. This amount of M&Ms constitutes the plate’s carrying capacity, so the plate can at no point hold more M&Ms. In each period, each student privately writes down the number of M&Ms he or she desires to harvest.” No student can harvest more than 20 M&Ms in any one period. If, after students reveal their desired harvest simultaneously and publicly, the “total desired harvest is less than or equal to the number of M&Ms on the plate, then each person takes their desired harvest.” If the total desired harvest exceeds the number of M&Ms on the plate, then each student gets a prorate share of the total harvest. The M&Ms left on the plate after harvest will reproduce, provided a viable population remains, which is at least 8 M&Ms. If a viable population remains, then each M&M has one offspring, so that the total M&Ms on the plate will double (if the carrying capacity permits). After reproduction, another period begins. If less than 8 M&Ms remain after a harvest, the population crashes, and the experiment ends. Otherwise, the experiment continues for a predetermined (though unknown to the students) number of periods. No communication is allowed between students. The second experiment allows communication. The third experiment designates a portion of the plate as the private property of each student. Each portion of the plate has a carrying capacity of 10 M&Ms. The experiment proceeds as before.
Class size: Any size. Large classes can be divided into various group sizes as an additional treatment variable.
Time: One class period.
Variations: Implement other over-harvesting solutions such as legal limits, taxes, and subsidies. Try anonymous harvest announcements or fixed, known number of periods to change the dynamics.
See also: Common pool games

 

Game: #76
Course: Micro
Level: Principles and up
Subject(s): Environmental and natural resource economics
Objective: To illustrate the ‘tragedy of the commons’ phenomena.
Reference and contact: Ortmann, Andreas and David Colander. Experiments in Teaching and in Understanding Economics. Burr Ridge, IL: Irwin, 1995. (Experiment #3)
Abstract: A group of students are asked to form a half-circle around a hypothetical sea. Objects (paper clips) representing ‘small fish’ are placed in the sea along with a single ‘big fish’ (set of keys). Each student is told that they will have two chances to retrieve the objects and that they will be compensated for doing so. Each small fish earns 10 cents in the first period and 20 cents in the second period. The big fish is worth 25 cents in the first period and 50 cents in the second period. Upon the instructor’s command, each student will have 20 seconds to ‘fish’ during the first period. The second period begins immediately after the first period and also lasts for 20 seconds. Invariably, ‘overfishing’ is quickly observed as all the objects are retrieved during the first period.
Class size: Six to eight students per group.
Time: One class period.
Variations: None indicated.
See also: Common pool games

 

Game: #77
Course: Micro, statistics
Level: Intermediate and up
Subject(s): Bayes’ Rule
Objective: To learn how to make predictions using Bayes’ Rule
Reference and contact: Holt, Charles A. and Lisa R. Anderson. “Classroom Games: Understanding Bayes’ Rule.” Journal of Economic Perspectives, 10(2), Spring 1996, pp. 179-187; cah2k@virginia.edu
Abstract: Students are shown an actual draw of a colored marble from one of two hidden cups. Each cup contains two marbles of one color and one of the other. Students are asked to make a prediction from which cup they believe the marble was drawn. A small monetary reward for a correct prediction is used for motivation. The students generally learn to approximate Bayes’ Rule in making their predictions by adjusting the marble counts to reflect prior probabilities.
Class size: 10 to 50 students.
Time: 30 minutes.
Variations: None indicated.
See also: Information games

 

Game: #78
Course: Micro, upper level electives
Level: Principles and up
Subject(s): Information cascades
Objective: Illustrates how individual decisions may be influenced by both private information and decisions made by other individuals.
Reference and contact: Anderson, Lisa R. and Charles A. Holt. “Classroom Games: Information Cascades.” Journal of Economic Perspectives, 10(4), Fall 1996, pp. 187-193; cah2k@virginia.edu
Abstract: Students are engaged in a sequential prediction game in which they receive private information on which to make predictions about an uncertain event. Student decisions are public information and may influence individual decisions in later sequences of the game. The game is set up so that students must draw a marble from one of two different urns. Each urn has three marbles inside. Urn A contains two dark marbles and one light marble. Urn B contains two light marbles and one dark marble. After a marble is drawn from the unknown urn, each student must make a prediction as to which urn they believe they have drawn from. As Anderson and Holt note, “a pattern of conformity can arise if initial predictions coincide and the inferred information dominates the private information of subsequent decision makers” (p. 188). The game can be used to illustrate, for example, a job search situation in which an employer rejects an applicant simply because others have rejected the applicant. Thus, negative information builds upon itself and reinforces previous decisions made by others in a cascading fashion. Discussion can focus on other examples of bandwagon effects.
Class size: 10 to 50 students.
Time: One class period.
Variations: The basic generic setup can be made more concrete by specifying the decisions in terms of a job search game or a product quality game.
See also: Information games

 

Game: #79
Course: Macro
Level: Principles and up
Subject(s): Inflation.
Objective: Illustrates how inflation can reduce the information contained in prices.
Reference and contact: O’Sullivan, Arthur and Steven N. Sheffrin. Economics. Upper Saddle River, New Jersey: Prentice Hall, 1997 (pp. 328-329); arthur.osullivan@orst.edu; smsheffrin@ucdavis.edu
Abstract: Students play the role of firms who must make production decisions based on a known output price and an unknown production costs. Firms receive a price between 5 and 15 for their product. Firms must then decide whether to produce 1 unit or nothing at all. Their cost of production, however, is random and is determined by a predetermined set of probabilities. After learning their production cost, students calculate their profits. Those with negative profit are declared bankrupt and are dropped from the game. The game is played for three periods. The game is then replayed for three rounds using a different set of production cost probabilities reflecting the impact of inflation.
Class size: Any size.
Time: Less than one class period.
Variations: None indicated beyond the change in production cost probabilities.
See also: Inflation and interest rate games

 

Game: #80
Course: Macro
Level: Principles and up
Subject(s): Money supply creation.
Objective: To demonstrate the process of money creation.
Reference and contact: Cameron, Norman E. “Simulating Money Supply Creation in Class,” Economic Inquiry, 35, July 1997, pp. 686-693; cameron@umanitoba.ca
Abstract: Three simultaneous markets operate to illustrate the money creation process. Students are divided into bankers, loan customers, and business firms while the instructor serves as the central bank. Loan customers are randomly assigned loan projects with varying projected rates of return which serve as their reservation values in the loan market. Business firms are randomly assigned scenarios which specify the minimum proportion of any extra sales revenue that the firm must keep in cash or in demand deposits. The games begins by having the instructor (as central bank) inject extra reserves into the system. Bankers attempt to loan the extra reserves to loan customers in the (pit auction) loan market. The newly financed loan customers proceed to the business firm zone to buy whatever project was just financed. The business firm must then satisfy the firm’s portfolio requirements as specified in their scenario by going to the bankers to negotiate terms for depositing any excess cash in a term or demand deposit. The banker must then satisfy the specified reserve requirements. The above process continues until all excess reserves are depleted.
Class size: 15 to 50.
Time: 75 minutes; a 50 minute class might require shifting the discussion of rules to the prior class and some of the debriefing to the following class.
Variations: Two versions are discussed, a simple version along with the more structured version discussed above.
See also: Money games

 

Games Economists Play: Games 81 – 90

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:

 

# players % of GDP Income Level
7 2.5% $10,000
8 5.0% $20,000
3 7.5% $30,000
2 10.0% $40,000
20 100% $400,000

 

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.

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

 

Games Economists Play: Games 91 – 100

Game: #91
Course: Micro
Level: Principles and up
Subject(s): Competitive markets
Objective: Illustrate basic elements of market theory and introduce students to the mechanics of the pit auction..
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #1)
Abstract: Class is divided into buyers (high and low value) and sellers (high and low cost) and participate in a pit auction. Experiment is followed up with extensive lab report questions in which students must compare the experimental results to the theoretical predictions.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: Bergstrom & Miller’s Experiment 2 involves shifting supply curves and allows sellers to sell more than one unit. Bergstrom & Miller’s Experiment 3 introduces a sales tax on sellers and then on buyers.
See also: Price system games

 

Game: #92
Course: Micro
Level: Principles and up
Subject(s): Prohibited markets
Objective: Illustrate the effects of prohibitions against buying and selling a good.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #4)
Abstract: Class is divided into buyers (addicts and non-addicts) and sellers. Addicts have a high buyer value ($30) relative to non-addicts ($15). Furthermore, addicts suffer a loss of $20 if they do not buy any drugs; non-addicts simply get zero profits if they do not buy any drugs. Sellers may sell up to two units at a cost of $10 per unit. Experiment is divided into three sessions. Session 1 is a baseline experiment with no unusual rules. Session 2 introduces an imperfect enforcement of prohibition. If a seller brings two contracts to the market manager, one of the contracts will be ‘confiscated’ and the seller must pay a fine of $5. If a seller brings only one contract to the market manager, it is confiscated and a fine is imposed on the seller. In session 3, the police resell the confiscated drugs to the original buyers at the originally negotiated price.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period.
Variations: None indicated
See also: Market intervention games

 

Game: #93
Course: Micro
Level: Principles and up
Subject(s): Minimum wages 
Objective: To introduce students to a simple example of a labor market and illustrate the effects of a minimum wage law. The notions of involuntary and voluntary unemployment are also developed.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #5)
Abstract: Class is divided into employers and workers. Each employer can hire up to two workers. An employer’s revenue from hiring one worker is $20 and from two workers it is $30. Workers are divided into low opportunity cost of working ($5) and high opportunity cost ($12). The experiment is divided into three sessions. Session 1 is a baseline experiment with no minimum wage law. Session 2 introduces a minimum wage of $15 per worker. Session 3 maintains the minimum wage but introduces an increase in labor demand by allowing employers to hire up to four workers.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Market intervention and labor market games

 

Game: #94
Course: Micro
Level: Principles and up
Subject(s): Externalities
Objective: Illustrates the inefficiencies of negative externalities and policies to correct for them.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #6)
Abstract: Class is divided into buyers and sellers and participate in a pit auction for lawn ornaments. Each lawn ornament sold imposes total damages of $15 on society, where the individual damage to each participant is calculated as d = $15/(number of participants). The experiment is divided into three sessions. Session 1 is the baseline/no controls market that generally leads to the typical competitive equilibrium that, because of the negative externality, has too many trades from an efficiency point of view. Session 2 introduces a pollution tax imposed on each seller of ornaments and that is set equal to the damage imposed by the sale of ornaments. Session 3 introduces tradable pollution permits. Permits are distributed to some students prior to trading in the ornament market. A seller of ornaments must first obtain a pollution permit before a trade in ornaments can be consummated.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Externality games

 

Game: #95
Course: Micro
Level: Principles and up
Subject(s): Monopolies and cartels. 
Objective: Illustrates the fundamental issues associated with market power.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #7)
Abstract: Class is divided into sellers and buyers of airline tickets and participate in a posted price market. Five students are designated as ticket sellers (airlines). The rest of the class is divided into one of two types of buyers: student or non-student. Most non-students have a higher buyer value than the students. The experiment is divided into four sessions. In session 1 the five sellers meet in secret to set an output quota for each firm. Each seller is given blackboard space on which to post a price. The price cannot be changed during a trading period. Buyers are then allowed to ‘shop’ for the best price. Sellers cannot sell tickets beyond their quota. Session 2 is similar to session 1 except that the quotas will not be enforced by the market manager (instructor). Sellers can also change their posted price during a given trading period. Session 3 is similar to session 1 except that it introduces the possibility of price discrimination among students and non-students. Session 4 maintains the enforcement of cartel quotas and price discrimination but allows the resale of tickets among traders.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: Sessions 1-3 can fit into one class period; session 4 may require some extra time.
Variations: None indicated
See also: Monopoly games

 

Game: #96
Course: Micro
Level: Principles and up
Subject(s): Entry and exit. 
Objective: To illustrate the short and long run equilibrium characteristics of a competitive market under entry and exit conditions.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #8) 
Abstract: The class participates in a two-stage posted-price market simulating the restaurant business. All students are buyers of restaurant meals and also have the opportunity to be a seller of restaurant meals. The experiment is divided into two sessions. Session 1 begins by posting a rough estimate of the demand for restaurant meals for all to see. In stage 1, each student is sequentially asked if they would like to open a restaurant for the current period. In stage 2, each restaurant is given blackboard space to post prices after which buyers are then allowed to shop for the best price. If too many restaurants open during the period, some will lose money. If too few restaurants open, they will make profits that will attract new entrants in later periods. Session 2 introduces a sales tax on each restaurant meal sold in order to simulate the effects of an increase in the variable cost of business.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Competitive entry games

 

Game: #97
Course: Micro
Level: Principles and up
Subject(s): Measuring productivity
Objective: Illustrate a production process subject to diminishing returns to the variable input.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #9)
Abstract: Class is divided into groups of 5 and must produce paper airplanes under a time constraint. Output is recorded and various productivity measures are calculated. Process is repeated with as many workgroups of size 10, 15, and 20 as possible. Diminishing returns should be observed quite clearly.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Supply games

 

Game: #98
Course: Micro
Level: Principles and up
Subject(s): Comparative advantage and trade
Objective: Illustrate the role of comparative advantage and specialization in generating gains from trade.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #10)
Abstract: Class is divided into two groups of workers, Richlanders and Poorlanders. Every worker has 20 hours of labor to divide between producing bread or fish. Richlanders have an absolute advantage over Poorlanders in producing both goods. Poorlanders, however, have a comparative advantage in producing bread. The experiment is divided into two sessions. In session 1 no trade is allowed between the groups. Each student must simply allocate time between fish and bread production and submit the choice taken to the instructor. Student payoffs are determined by the minimum of the quantities of bread and fish production. Thus, an equalized output of the two goods is the optimal allocation. Session 2 is divided into two stages. In stage 1 the students determine their production amounts and obtain trading tickets for each unit of their production. In stage 2 the groups are allowed to trade with each other. After trading is completed, the final commodity holdings are recorded and payoffs determined.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: International trade games

 

Game: #99
Course: Micro
Level: Principles and up
Subject(s): Imperfect information and adverse selection
Objective: To illustrate the ‘lemons problem’ in a market characterized by asymmetric information.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #11)
Abstract: A used car market is simulated in which some cars are of good quality and some are ‘lemons.’ Used car owners know their car type. A good car is worth $1600 to the original owner and a lemon is worth $0. Used car dealers can not tell which cars are good before buying them. A good car is worth $3500 to dealers and lemons are worth $500. The experiment is divided into four sessions. In session 1 the instructor leads the class through a thought experiment in which each student imagines himself as a used-car dealer who sets a price and can buy as many used cars as people will sell to him at that price. The class considers two situations: one in which there are equal numbers of good and bad cars and another in which there are twice as many lemons as good cars on the market. The purpose is to lead the student to the profit maximizing answer in each situation, namely, $1601 in the first situation and $1 in the second situation. Session 2 begins by appointing 6 students as dealers and all others as used-car owners. Half of the used cars are designated as good and half are lemons. Dealers post the prices they are willing to pay on the blackboard. Car owners then sell their cars at the best price. Session 3 is the same as session 2 except that 2/3 of the used cars are lemons. Session 4 is similar to session 2 except that each car owner has a certificate indicating the quality of the car that each possesses.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Information games

 

Game: #100
Course: Micro
Level: Principles and up
Subject(s): Auctions
Objective: To learn about the procedures of some commonly used types of auctions and optimal bidding strategies.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #12)
Abstract: A series of private and common value auctions are demonstrated. The private value auctions are broken into four types: English, Dutch, First-Price Sealed-Bid, and Second-Price Sealed-Bid. Buyer values are determined using the last four digits of the student’s social security number. For example, in the English auction, the last two digits represent the buyer value while in the Dutch auction the buyer value is 100 minus the last two digits. After each auction, the winning bid and the highest and second highest buyer values are posted on the board for comparison. There are three common value auctions: pennies in a jar, the unreliable accountant, and the escalation auction. The first two illustrate the often observed ‘winner’s curse,’ while the last one illustrates the ‘overbidding’ phenomenon associated with patent races, for example. As the name implies, a jar is filled with pennies whose total value is known only to the instructor. Students bid on the jar by writing their bids on a piece of paper. The highest bid wins. The unreliable accountant auction involves bidding on a commodity whose value is the same for all bidders. Buyers do not know the exact value of the commodity. However, each buyer can get an accountant’s estimate of the commodity’s value by drawing a slip of paper containing such estimates. Students know that the true value of the commodity is equal to the average of the accountant’s estimates. Each student makes a bid after observing their accountant’s estimate. The escalation auction is similar to Haupert (1994) in that a dollar bill is auctioned off under the rule that the second highest bidder must pay along with the high bidder.
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Auction games

 

Games Economists Play: Games 101 – 113

Game: #101
Course: Micro
Level: Principles and up
Subject(s): Bargaining 
Objective: To learn how to solve simple sequential games through backward induction.
Reference and contact: Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles. McGraw Hill, 1997 (Experiment #13)
Abstract: Class is divided into buyers and sellers of bicycles in a bilateral bargaining environment. Buyers are willing to pay up to $150 and sellers are willing to accept down to $100. The experiment is divided into three sessions. Session 1 is an ultimatum game in which buyers write down their bids and sellers either accept or reject the bids. Session 2 is a two-stage game in which sellers can either accept or reject a buyer’s initial offer or write a counteroffer to the buyer. Buyers who receive counteroffers can accept or reject the counteroffers. Session 3 is a three-stage game in which buyers can make a second offer after rejecting the seller’s counteroffer
Class size: 15 to 60 work smoothly; larger class sizes can be accommodated.
Time: One class period
Variations: None indicated
See also: Bargaining games

 

Game: #102
Course: Micro
Level: Principles and up
Subject(s): Privatization in the former Soviet Union
Objective: To illustrate how incentives influence the choice of investment opportunities.
Reference and contact: Gay, David E.R. “Teaching Privatization in the Soviet Union: An Experimental Economics Approach.” Classroom Expernomics, 1(1), Spring 1992, pp. 5-6; dgay@comp.uark.edu
Abstract: This game is based on a 1990 Soviet proposal to privatize elements of the Soviet economy by creating a ‘USSR stock’ indexed to the overall economy. Students are endowed with 100 rubles of which they must invest all or some in either a private savings account or a group USSR stock. The private savings account pays a guaranteed 10% return along with a claim on the principal. The USSR stock pays an uncertain return and the investor has no claim on the principal; that is, the asset can not be sold once invested in. Students make their investment choices over a series of decision-making periods. At the end of each period, each student determines how the sum of their return from the private savings account, their return from the USSR stock, and new rubles will be split among the private savings account and the USSR stock in the next period. Typical results indicate that most students allocate over 75% of their available funds into the private savings account.
Class size: Any number.
Time: One class period
Variations: None indicated
See also: Public goods and institutions games

 

Game: #103
Course: Micro
Level: Principles and up
Subject(s): Demand
Objective: To construct and identify the demand curves for a set of everyday commodities.
Reference and contact: Ortmann, Andreas and Mary McAteer Kennedy. “The Construction and Identification of Demand Curves: A Concerted Experiment for Principles Instructor and Dining Services.” Classroom Expernomics, 6(1), Spring 1997, pp. 6-10.
Abstract: In concert with the director of dining services, the instructor led his class through a semester-long project designed to construct and identify the demand curve for a set of eight items commonly available in the college’s student center store. The store would vary the prices on the eight items on a weekly basis. Each week students were informed of the prices for the coming week and asked to forecast (and justify) the quantities sold. Students were then asked to plot the price/quantity combinations and interpret the results. Interpretations focused on violations of ceteris paribus conditions and on shifting curves.
Class size: Any number.
Time: Semester long project.
Variations: None indicated
See also: Demand games

 

Game: #104
Course: Micro, Industrial Organization, Regulation, Law and Economics
Level: Principles and up
Subject(s): Asymmetric information and adverse selection. 
Objective: To illustrate the lemons problem associated with imperfect information regarding product quality.
Reference and contact: Holt, Charles A. and Roger Sherman. “A Market for Lemons.” Journal of Economic Perspectives, 13(1), Winter 1999, pp 205-214; cah2k@virginia.edu
Abstract: Class is divided into buyers and sellers and participate in a posted price market. The experiment is divided into two sessions. In the first session, sellers must choose and publicly post a product quality ‘grade’ and price. There are three product quality levels to choose from. Sellers may sell up to two units per period where the second unit is more costly than the first. Buyers are randomly chosen to shop among the sellers and can buy only one unit per period. Buyer values are higher for higher quality products. If a buyer wishes to buy a seller’s second unit, the seller has the right to refuse the sale since they are required to sell the unit at the same price and quality grade as the first unit, even though the marginal cost is $1 higher. Repeat session 1 until prices converge to an equilibrium grade. The second session represents imperfect information in that sellers only post prices and not product quality grades. Invariably, prices tend to drop as sellers try to take advantage of the asymmetric information in session 2. Discussion can focus on potential solutions to the ‘lemon’ problem, viz., warranties and regulations.
Class size: 10 to 15 students, with larger classes divided into teams of buyers and sellers.
Time: One class period
Variations: None indicated
See also: Information games

 

Game: #105
Course: Micro, money and banking, financial management
Level: Principles and up
Subject(s): Asset valuation theory
Objective: To illustrate the functioning of asset markets.
Reference and contact: Bell, Christopher R. “A Noncomputerized Version of the William and Walker Stock Market Experiment in a Finance Course.” Journal of Economic Education, 24(4), Fall 1993, pp. 317-324; bell@unca.edu
Abstract: Students take on the role of asset traders in a double-sealed auction market. Each student receives a cash endowment and 12 asset shares at the start of each trading session. The asset pays an uncertain dividend at regular intervals. The per share dividends are determined using a random draw from a uniform distribution. Traders submit written bids to buy or sell a given number of shares at a limit price. The instructor sorts the bids to buy and sell into demand and supply curves, thereby determining the market-clearing price and quantity. All trades occur at the same price. Student instructions explain two common investment strategies: ‘fundamental analysis’ whereby an asset’s value is equal to the present value of its expected dividend flow, and ‘technical analysis’ where traders rely on past patterns in prices and trading activity to predict future price changes. Post-game discussion can focus on whether trading prices converge toward intrinsic values or if a speculative bubble emerges.
Class size: Any number, with large classes broken into teams.
Time: The trading is stretched out over the latter part of the course with one trading round per class period
Variations: Stock splits and shifts in the dividend probability distribution can be used to add some realism.
See also: Asset market games

 

Game: #106
Course: Micro, environmental economics, law & economics, public economics
Level: Principles and up
Subject(s): Externalities
Objective: To illustrate the generation of a negative externality and the application of the Coase Theorem.
Reference and contact: Hoyt, Gail M., Patricia L. Ryan, and Robert G. Houston, Jr. “The Paper River: A Demonstration of Externalities and Coase’s Theorem.” Journal of Economic Education. 30(2), Spring 1999, pp. 141-147.
Abstract: The class is divided into groups of firms engaged in an upstream/downstream production relationship. In upstream Firm A, students produce answers to 10 simple multiplication problems using a pencil and 5 small pieces of paper. In downstream Firm B, students produce paper airplanes using the same small pieces of paper. Firm A students earn one bonus point for each solved math problem. Firm B students earn two bonus points for each cleanly (no writing on it) produced airplane. The experiment is divided into two rounds. Round one involves no communication between firms and represents a situation in which Firm A students ignore the cost (pencil markings on the pieces of paper) imposed on Firm B students. At the end of round one, the instructor leads the class through a discussion in which he tries to elicit from the students a Coasian solution to the externality. Round two introduces a clearly defined property rights allocation and compensation rules and repeats the production process all over again. Production totals from round two will typically be larger than round one as the parties now have an incentive to internalize the externalities. Follow up discussion can focus on the impact of income effects and transaction costs.
Class size: Any even number.
Time: One class period
Variations: None indicated
See also: Externality games

 

Game: #107
Course: Micro
Level: Principles and up
Subject(s): Productivity and cost concepts
Objective: To illustrate a production process subject to diminishing returns and illustrate the construction of a production possibilities frontier 
Reference and contact: Neral, John and Margaret Ray. “Experiential Learning in the Undergraduate Classroom: Two Exercises.” Economic Inquiry, 33, January 1995, pp. 170-174; j_neral@fre.fsu.umd.edu
Abstract: Two production processes are explained. The first, a widget production process, is identical to Neral (1993) and is used to illustrate the concept of diminishing marginal returns. The second involves the generation of a production possibilities frontier between two goods, widgets and whajamas. A widget is simply a piece of paper folded twice and stapled at both ends. A whajama is a piece of paper folded three times and stapled twice. Five students are chosen to participate in a three-stage production process. In the first stage, all resources (paper, desk space, and stapler) are devoted to widget production. In the second stage, all resources are devoted to whajama production. In stage three, resources are allocated in various ways between widgets and whajamas. The data collected from each stage is used to plot a production possibilities frontier. Discussion may focus on ways to expand production through expanded resources and technological improvements.
Class size: Any number
Time: One class period
Variations: None indicated
See also: Supply games

 

Game: #108
Course: Micro
Level: Principles and up
Subject(s): Rent-seeking and non-market allocations
Objective: Illustrates the social inefficiencies of non-market allocation mechanisms, such as lotteries, in situations involving a competition among several bidders for a single prize.
Reference and contact: Goeree, Jacob K. and Charles A. Holt. “Rent-Seeking and the Inefficiency of Non-Market Allocation.” Journal of Economic Perspectives, 13(3), Summer 1999b, pp 217-226; cah2k@virginia.edu
Abstract: Students are divided into four teams of ‘investors’ that compete against each other in a bidding contest for a monopoly license. Each team is given 13 cards of the same suit from a regular playing deck, an initial $100,000 endowment, and an envelope. The playing cards represent lottery tickets in a drawing for a license that is worth $16,000. Each lottery ticket costs $3,000 and represents the costs of filing an application for a license. The game is played under four treatments. In the first treatment, the lottery tickets cost $3,000 each. Each team privately decides on how many playing cards (lottery tickets) to place in their envelope. Each envelope is then collected and the cards are removed and shuffled. The total number of cards is announced and the top card is selected as the winning application. Team earnings are calculated and recorded. The playing cards are then returned to each team without revealing how many cards were played by each team. In the second treatment, the cost of a lottery ticket is reduced to $1,000, ostensibly reflecting a more cost-efficient lottery process. However the impact on total social costs is not obvious as the lower unit cost is likely to induce more applications. A third treatment involves assigning asymmetric license values to each team in order to simulate that some investors may be more efficient at providing the licensed service than others. A fourth treatment involves the instructor as an auctioneer using the English auction mechanism to allocate the license. The winner of the auction must pay the final bid and the losers do not pay anything.
Class size: Any number.
Time: One class period
Variations: None indicated
See also: Public choice games

 

Game: #109
Course: Micro
Level: Principles and up
Subject(s): Public goods and free riding
Objective: Illustrates the conflict between private and social incentives in providing public goods.
Reference and contact: Holt, Charles A. and Susan K. Laury. “Classroom Games: Voluntary Provision of a Public Good.” Journal of Economic Perspectives, 11(4), Fall 1997, pp. 209-215; cah2k@virginia.edu
Abstract: Four playing cards (two red, two black) are distributed to each student. Each student must “play” two cards which the instructor collects. Each red card the student keeps generates four dollars in personal earnings. Students also earn one dollar for each red card that is played by the entire class. Thus, playing a red card is equivalent to contributing to the provision of a public good. The black cards are only used in order to mask the identity of the contributors (or non-contributors, as the case may be). After the instructor collects two cards from each student, the number of red cards is tallied and student earnings determined. The cards are returned to the students and a new decision round begins.
Class size: Any number. Large classes can simply use a subset of students. You will need one deck of playing cards for every 13 students.
Time: 30 minutes
Variations: Reduce the value of the kept red cards to two dollars after several decision rounds. Communication among students may be allowed in order to facilitate group decision making. Instructors may also want to vary the size of the group or allow students to revise contributions.
See also: Public goods games

 

Game: #110
Course: Micro, environmental economics
Level: Principles and up
Subject(s): Tradable pollution permits
Objective: To illustrate the cost advantages of tradable pollution permits in achieving a given level of pollution abatement.
Reference and contact: Walbert, Mark S. and Thomas J. Bierma. “The Permits Game: Conveying the Logic of Marketable Pollution Permits.” Journal of Economic Education, 19(4), Fall 1988, pp. 383-389; mswalber@ilstu.edu
Abstract: Students are divided into three groups representing industrial sources of pollution, such as steel mills or chemical plants. Each group receives information on its (unique) marginal cost of pollution abatement and a record sheet on which to record its calculations. Each group is then informed that the current pollution level in their area exceeds national standards and must be reduced. Four proposals to reduce pollution are to be considered: uniform emission limits, uniform percentage reductions, tradable permits in which all permits are auctioned off, and tradable permits in which all permits are initially given enough permits to cover half of their current emissions prior to the auction. Student groups must calculate and determine the least costly method of reducing pollution.
Class size: Any size. 
Time: Two class periods to cover all four options.
Variations: Expand the number of polluters or allow environmental groups to bid on permits.
See also: Externality games

 

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

 

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:

Row Player Column Player
Black Red
Black 3, 3 0, 5
Red 5, 0 2, 2

Applications discussed include duopoly price competition, product quality, bankruptcy, and public goods provision.

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: Boh�ček, 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 http://mcnet.marietta.edu/~delemeeg/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 http://mcnet.marietta.edu/~delemeeg/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 http://mcnet.marietta.edu/~delemeeg/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 http://mcnet.marietta.edu/~delemeeg/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

 

Games Economists Play: Games 131 – 140

Game: #131
Course: Macroeconomics, Money and Banking
Level: Intermediate and up
Subject(s): Money, medium of exchange
Objective: To promote discussion of the social origins and characteristics of money.
Reference and contact: Hazlett, Denise. �A Search-Theoretic Classroom Experiment With Money.� Classroom Expernomics: Volume 10 (Fall 2001). Available at http://www.marietta.edu/~delemeeg/expernom/Fall2001/hazlett.html
Abstract: Students act as traders faced with a double coincidence of wants in an economy with three commodities.  Through the trading process, students discover the value of using one of the commodities as a medium of exchange, namely, the commodity with the lowest storage costs
Class size: 10 or more students
Time: One class period.
Variations: Using different utility functions and storage costs may lead to different equilibrium strategies.
See also: Money games

 

Game: #132
Course: Microeconomics, Macroeconomics
Level: Principles and up
Subject(s): Gains from trade, medium of exchange
Objective: To demonstrate the gains from trade and the use of fiat money as a medium of exchange.
Reference and contact: Houston, Robert G. Jr. and Hoyt, Gail M. �International Trade and Money: A Simple Classroom Demonstration.� Classroom Expernomics: Volume 10 (Fall 2001). Available at http://www.marietta.edu/~delemeeg/expernom/Fall2001/houston.html
Abstract: The class is divided into two groups, say, women and men.  Each group is given fictitious admission tickets to various sporting and entertainment events.  Tickets that generally appeal to women are given to the men and vice versa.  In Round 1, each student must declare what the maximum amount they would be willing to pay to purchase the ticket in their possession. The total value of the tickets is recorded.  In Round 2 students are told that they may trade with anyone in their own group. After all trades, the value of all tickets is again calculated.  In Round 3, students are allowed to trade with anyone from either group.  The value of all tickets, of course, should be higher than in Round 2.  In Round 4,the instructor could select a few �undervalued� tickets and auction then off to demonstrate the value of fiat money in promoting efficient trades.
Class size: 20 or more students
Time: 30 minutes
Variations: None indicated.
See also: Money and International Trade games

 

Game: #133
Course: Microeconomics
Level: Principles and up
Subject(s): Demand curves and elasticity
Objective: To illustrate the derivation of market demand curves and various measures of elasticity.
Reference and contact: Hill, Cynthia D. �A Classroom Game for Developing Market Demand and Demand Elasticities: The Snicker Effect.� Classroom Expernomics:  Volume 10 (Fall 2001). Available at http://www.marietta.edu/~delemeeg/expernom/Fall2001/hill.html
Abstract: Students take on the role of buyers at a grocery store in which they all have the same income and face the same prices.  The instructor varies the prices of the products in the first stage and then varies the income level (with all prices back at their original levels) in the second stage.  Data on individual purchases is then used to calculate the market demand and various elasticity measures.
Class size: 20 students or more
Time: One class period
Variations: None indicated.
See also: Demand and Elasticity games

 

Game: #134
Course: Micro, environmental economics, law & economics, public economics
Level: Principles and up
Subject(s): Externalities, Coase theorem, common property, transaction costs
Objective: To illustrate the impact of transaction costs and common property on Coase theorem solutions to externalities.
Reference and contact: Andrews, Thomas P. “The Paper River Revisited: A Common Property Externality Exercise.” Journal of Economic Education. 33(4), Fall 2002, pp. 327-332.
Abstract: This is a modified version of Game #106. In the original game, paired students share a piece of paper as firm A and firm B in an upstream/downstream production relation where firm A has an incentive to dirty the paper and firm B needs to clean it before B’s production can begin. To increase transaction costs and hence to gauge their influence, students work in groups rather than pairs in this modified version of the game. Further, the production resource is changed to become a common
property resource. The Coasian solution will be more difficult to achieve.
Class size: Any number
Time: One class period
Variations: One to three class periods, depending on features played Variations:   Some are indicated, e.g., switching the common property resource flow to go from firm B to firm A instead of from A to B;
changing prices of other inputs; add an intermediary group to carry negotiations between firms A and firms B.
See also: Externality and Coase games

 

Game: #135
Course: Micro, natural resource/environmental economics
Level: Principles and up
Subject(s): Renewable open-access (common property) resources; property rights; regulatory schemes
Objective: To simulate the impact of various property right and regulation schemes on the exploitation of renewable resources.
Reference and contact: Giraud, Kelly L. and Herrmann, Mark. “Classroom Games: The Allocation of Renewable Resources under Different Property Rights and Regulation Schemes.” Journal of Economic Education. 33(3),
Summer 2002, pp. 236-253.
Abstract: Renewable resources, such as oceanic fish, can nonetheless be exhausted. This game simulates different property right and regulation schemes to gauge the impact on resource exploitation.
Class size: 15-30 students; for larger classes, simultaneous but separate games can be set up
Time: Depending on features, one to two 50-min class periods; 15 min pre-class game set-up time needed
Variations: Five scenarios are discussed, plus one homework scenario.
See also: Common pool games

 

Game: #136
Course: Microeconomics
Level: Principles and up.
Subject(s): Ultimatum game; dictator game; repeated one-shot games with changing payoffs; equity considerations; demand curve for fairness; tradeoff between money-income and fairness
Objective: To measure non-monetary influences on behavior and initiate discussion in behavioral economics.
Reference and contact: Dickinson, David L. “A Bargaining Experiment to Motivate Discussion on Fairness.” Journal of Economic Education. 33(2), Spring 2002, pp. 136-151.
Abstract: In the well-known ultimatum game, a player proposes how to divide a given resource, and a responder accepts or declines the offer (in the dictator game, the responder cannot decline). Offers and responses are influenced by preferences regarding fairness, altruism, reciprocity, revenge, etc. This is a repeatedly played one-shot game with randomly rematched student pairs and changing payoff pies per round. By tracking offers and responses, the instructor can measure non-monetary influences on behavior and initiate discussion in behavioral economics.
Class size: 40 or fewer, in odd-numbered classes a student can serve as an record-keeping assistant (the game has also been played successfully with 100+ students by using groups of 3 students to play a
“single” proposer or responder).
Time: One or two class 50-min class periods depending on features used; one class period is sufficient for instructors and playing 10 rounds.
Variations: If time-constrained, play a single one-shot round only at the end of a class period. Several substantive extension are discussed in the paper, e.g., by adding a taxation component that results in forced redistribution of earnings.
See also: Bargaining and Fairness games

 

Game: #137
Course: Microeconomics
Level: Principles and up.
Subject(s): Price system and non-price allocation
Objective: To demonstrate the advantages of price allocation over non-price allocation
Reference and contact: Alden, Lori.  2003.  The Frozen Price Game.  The Social Studies   94(1): 35-39.  See http://www.sonoma.edu/econ/cee/games.html
Abstract: Students take on the role of buyers of ice after a hurricane hits the area.  In round one, ice prices are fixed at pre-hurricane levels and students must decide whether to wait in line to get ice on a first-come, first-served basis.  Students are assigned buyer values and opportunity costs of time along with a pre-determined mandatory wait time.  Students must decide if it is �worth it� to wait in line.  In round two, the ice is allocated with a price mechanism.
Class size: Any number
Time: One 50 minute class
Variations: n/a
See also: Price system games

 

Game: #138
Course: Microeconomics, industrial organization, game theory
Level: Principles and up
Subject(s): Bertrand price undercutting
Objective: To demonstrate competitive price undercutting (iterative unraveling) and noncollusive market outcomes
Reference and contact: Ortmann, Andreas. “Bertrand Price Undercutting: A Brief Classroom Demonstration.” Journal of Economic Education. 34(1), Winter 2003, pp. 21-26.
Abstract: Each student is a hypothetical seller, all charging an identical price as the demonstration begins, and hypothetical buyers are assumed to buy equiproportionally from the sellers. Sellers are competing for buyers and may underprice other sellers in order to generate sales. (Marginal and fixed cost are assumed at zero.) Buyers are price sensitive, so that the lowest price attracts the largest number of buyers. Sellers submit prices to the instructors on a piece of paper. The lowest bidding student(s) receive a monetary prize tied to the fictional price in the experiment. The monetary prize depends on the instructor’s risk attitude and budget constraint. (But, invariable, the author reports, the fictional price is driven down to its lowest possible level, so that the payout is correspondingly low).
Class size: Done with 60 students in the experiment; the size can be larger
Time: “As little as 10 minutes”
Variations: Allow communication among sellers; introduce positive marginal cost; vary the payoff
See also: Oligopoly games

 

Game: #139
Course: Microeconomics, industrial organization, international trade, game
theory
Level: Principles and up
Subject(s): Cournot and Bertrand pricing
Objective: Demonstration of strategic interaction between two players
Reference and contact: Beckman, Steven R. “Cournot and Bertrand Games.” Journal of Economic Education. 34(1), Winter 2003, pp. 27-35.
Abstract: Preproduced payoff matrices are handed out (or displayed via overhead projection). One player is a row-player, the other a column-player. Players choose optimal strategies, given the other player’s possible moves. The construction of the matrices permits monopoly and shared monopoly outcomes, and Cournot, Bertrand, and Stackelberg behavior. Other matrices permit students to play price competition quantity competition, with either perfect substitutes or perfect complements.
Class size: Done with 60 students in the experiment; the size can be larger
Time: Two class periods (for four games)
Variations: Discussed in the abstract
See also: Oligopoly games

 

Game: #140
Course: Micro
Level: Principles and up
Subject(s): Competitive equilibrium
Objective: To illustrate the concept of competitive equilibrium
Reference and contact: Ruffle, Bradley J. “Competitive Equilibrium and Classroom Pit Markets.” Journal of Economic Education. 34(2), Spring 2003, pp. 123-137
Abstract: Extensive technical discussion of how to prepare, run, and follow-up on a pit-trading experiment. Includes classroom “pointers,” exercises, and extensive discussion, including discussion of variations of the game
Class size: 16-30 students
Time: One class period
Variations: Discussed in text
See also: Price system games

 

Games Economists Play: Games 141 – 150

Game: #141
Course: Micro
Level: Principles and up
Subject(s): Public goods
Objective: To illustrate the nature of the free rider problem and potential solutions for public goods provision.
Reference and contact: Melanie Marks, David Lehr, and Raymond T. Brastow, �Cooperation versus Free-Riding in a Threshold Public Goods Setting: A Classroom Experiment” Available from the SSRN Electronic Paper Collection:  http://papers.ssrn.com/paper.taf?abstract_id=385380
Abstract: The standard subscription based public goods experiment is modified to incorporate a provision point (threshold).  If the sum of contributions covers the predetermined project costs, then the project is provided; otherwise all contributions are returned. The all-or-nothing feature of the provision point rule raises the cost of free-riding so that there is no dominant strategy to free ride under the rule.  In other words, students must choose their level of cooperation.
Class size: 10 students (larger classes can divide students into groups)
Time: One 50 minute class
Variations: Allow communication, different reward mechanisms, different number of periods
See also: Public goods games

 

Game: #142
Course: Macro
Level: Principles and up
Subject(s): Money and banking
Objective: To demonstrate why banks and central banks exist.
Reference and contact: Paul Woodburne, “A Money and Banking Simulation Game for High School Upperclassmen and College Level Non-Majors”  Available from the SSRN Electronic Paper Collection:          http://papers.ssrn.com/paper.taf?abstract_id=390765
Abstract: A simulation game that illustrates the role of banks as �informational specialists.� Students are divided into four towns, each comprised of four shops and a trading company.  Each shop is presented with a shopping list in which they must purchase items from all shops in all towns. The game is divided into three rounds.  There are no banks in round one and all trades take place with bills of exchange issued by each town�s trading company.  Furthermore, out-of-town bills are costly to exchange.  In round two a single bank for all towns exists to examine the credit worthiness of all trading companies and issues bank notes for credit worthy bills of exchange.  In round three a central bank is introduced.
Class size: 50 students with movable desks
Time: n/a
Variations: n/a
See also: Money games

 

Game: #143
Course: Micro
Level: Principles and up
Subject(s): Long run competitive equilibrium
Objective: Demonstrates the long run adjustment process toward a competitive equilibrium.
Reference and contact: Stephen L. Cheung, “A Classroom Entry/Exit and Supply Game with Price Taking Firms” Available from the SSRN Electronic Paper Collection:           http://papers.ssrn.com/paper.taf?abstract_id=395580
Abstract: Students take on the role of price-taking firms facing identical increasing marginal costs and differing fixed costs and engaged in short-run and long-run decision making. Firms must decide whether or not to enter a market, thereby incurring a fixed cost.  The market price is determined by the instructor as a function of the number of firms that have entered the market. Once in the market, the firm may offer multiple units at the going price.  Subsequent rounds are played until a long run equilibrium is achieved.
Class size: Any number of students
Time: One 50 minute class period.
Variations: n/a
See also: Competitive entry games

 

Game: #144
Course: Micro
Level: Principles and up
Subject(s): International trade
Objective: To illustrate the interaction between rich and poor nations.
Reference and contact: Brian J. Peterson 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
Abstract: �Students participate in an international trade simulation in which they are �born� into a country and must produce and sell goods to survive. Countries, ranging in economic power from the United States and Japan to Ethiopia and Somalia, are endowed with a level of raw materials commensurate with their national income, and must produce at a level sufficient to maintain both their population and environmental quality. As a result of this interaction, students discover that there is a reason why poor nations remain poor, and why international relations are so problematic. Students also see firsthand the economic effects of the production process, such as the declining use of labor and increased use of capital in producing a country’s output.�
Class size: Any size
Time: One 75 minute class
Variations: n/a
See also: International trade games

 

Game: #145
Course: Micro
Level: Principles and up
Subject(s): Pollution permits.
Objective: To illustrate the mechanics and efficiency properties of a tradable pollution permit.
Reference and contact: Amy W. Ando and Theresa J. Ramirez, “Tradable Discharge Permits: A Student-Friendly Game” Available from the SSRN Electronic Paper Collection:           http://papers.ssrn.com/paper.taf?abstract_id=432985
Abstract: Students are grouped into six firms, each with their own marginal abatement cost schedules. In round one, firms must respond to uniform pollution standards by calculating the necessary abatement. In round two, pollution permits are uniformly distributed among firms, who are free to buy and sell permits.  The instructor acts as a Walrasian auctioneer by calling out prices to equate supply and demand.  Once an equilibrium price is achieved, firms calculate their abatement costs and permit costs/revenues.  The net costs of the permit system can then be compared to the uniform standards system.
Class size: Up to 30 students.
Time: One 50 minute class period.
Variations: Change number of permits; use non-uniform initial allocation of permits
See also: Externality games

 

Game: #146
Course: Micro
Level: Principles and up
Subject(s):
Objective:
Reference and contact: Heather E. Campbell and Barbara C. McCabe, “Fun With Economics: Simulating Theory to Stimulate Learning.” Journal of Public Affairs Education, Vol. 8, No. 2 April 2002 pp131-139  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=370701
Abstract:
Class size: Any size
Time:
Variations:
See also:

 

Game: #147
Course: Microeconomics, Game Theory
Level: Principles and up
Subject(s): Nash equilibrium
Objective: To teach the Nash equilibrium solution concept.
Reference and contact: Virtudes Alba-Fernandez, Pablo Branas-Garza, Francisca Jimenez-Jimenez, and Javier Rodero-Coasano, “Teaching Nash Equilibrium and Strategy Dominance: A Classroom Experiment on the Beauty Contest.”  Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=437561
Abstract: A repeated version of the beauty contest game is used to let students react to other players’ choices and to converge iteratively to the Nash equilibrium.
Class size: Any size
Time:
Variations:
See also: Oligopoly games

 

Game: #148
Course: Microeconomics
Level: Principles and up
Subject(s): Market efficiency, market maker, arbitrage
Objective: To demonstrate the efficiency of asset markets.
Reference and contact: Clark L. Maxam and Mary-Carol B. Maxam. “Efficient Markets and Information Processing: A One-Hour Classroom Trading Simulation.” Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=443640
Abstract: “The simulation involves putting students into teams of 4 or 5 (7 or 8 teams maximum) which function as OTC dealers/market makers in a novel asset market. The students have intimate knowledge of certain characteristics of this asset, but not full information. The simulation begins when each team posts a bid and ask price for the asset which is displayed for all market participants. Trading commences as each team is allowed to make one and only one trade with a competing market maker. Trades as well as bid/ask spreads are posted by the moderator who also interjects with commentary tailored to the knowledge level of the students (active versus passive trading, market maker risk, long and short concepts, price discovery concepts). After each round of trading, the teams are allowed to revise their bid/ask spreads. Inevitably, students find that the effective bid/ask spread in the market narrows purely as a function of trading since no new information is provided.”
Class size: Any size
Time: one class period
Variations: Use of outside traders and economic news releases to examine effects on bid/ask spreads and volatility.
See also: Asset market games

 

Game: #149
Course: Macroeconomics; Money and Banking; Experimental Economics
Level: Principles; Intermediate
Subject(s): Money; Costs of Barter; Medium of Exchange
Objective: Origin and characteristics of money
Reference and contact: Hazlett, Denise. [hazlett@whitman.edu] “A Search-Theoretic Classroom
Experiment with Money.” International Review of Economics Education Vol. 2 (2003)
[online at http://www.economics.ltsn.ac.uk/iree/i2/hazlett.htm]
Abstract: Students take the role of traders who face a double coincidence of wants problem.
As they recogize the benefits of overcoming trading frictions, students spontaneously begin using a consumption good as a medium of exchange. Trading in this environment allows students to experience the social conditions that give rise to money, namely specialisation and decentralisation. The experiment also demonstrates how a particular
characteristic can make a commodity a good candidate for becoming money. Here, the commodity with the lowest storage cost spontaneously emerges as a generally accepted medium of exchange.
Class size: variable (up to 100 or more students)
Time: 30 minutes
Variations: possible, but require perhaps more time and effort than warranted
See also: Money games

 

Game: #150
Course: Microeconomics, Public Finance, Natural Resource Economics; Environmental Economics; Game Theory
Level: Undergraduate; Graduate; Consulting and Field-research
Subject(s): Negative externality; Public Goods; Common-Pool Goods; Environment; Natural Resources; Institutions; Regulations; Enforcement; Nash Equilibrium
Objective: Demonstrating that managing local environmental resources with moderately enforced government regulations can be counterproductive, whereas nonbinding communications can be remarkably
effective.
Reference and contact: Murphy, James J. and Juan-Camilo Cardenas. “An Experiment on Enforcement Strategies for Managing a Local Environment Resource.” Journal of Economic Education Vol. 35, No. 1 (Winter 2004), pp. 47-61.  [online: http://www.indiana.edu/~econed/issues/v35_1/5.htm]
Abstract: Forest firewood extraction and water quality are inversely related. Players must decide how much time to spend collecting firewood. A payoff matrix is provided: the more time the sum of players spends in the forest, the lower the collective payoff, and vice versa. The experiment consists of this three-treatments sequence: (a) 5-8 rounds: unregulated resource extraction; (b) 5-8 rounds: extraction under an imperfectly enforced, externally imposed regulation; (c) extra rounds: group communication permitted to gauge effect as a self-regulation tool. The experiment is designed for multiple groups of n=8 students. Each group represents an autonomous game.
Class size: small to very large (but will need student assistants to help with administration and record keeping)
Time: 75 minutes (allows for 15-20 rounds of play)
Variations: smaller group sizes (down to n=4) are discussed in text; change treatment sequence
See also: Externality games

 

Games Economists Play: Games 151 – 160

Game: #151
Course: Macroeconomics; Money and Banking; Corporate Finance; Monetary Theory
Level: Principles; intermediate
Subject(s): Behavioral foundations of macroeconomics; money demand; risk; portfolio allocation
Objective: Observe how aggregate money demand responds to asset volatility (risk)
Reference and contact: Bradley, T. Ewing, Jamie B. Kruse, Mark A. Thompson.  “Money Demand and Risk: A Classroom Experiement.” Journal of Economic Education Vol. 35, No. 3 (Summer 2004), pp. 243-250. [online: http://www.indiana.edu/~econed/issues/v35_3/3.htm] [Contact: bradley.ewing@baylor.edu]
Abstract: Students receive a $100 (play) endowment; they allocate any desired portion of their endowment among no-risk (=consumption), low-risk, and high-risk assets (in terms of volatility); riskiness (low
or high) is announced prior to allocation decision; actual riskiness is determined, post-allocation, by coin-flip (and associated risk multipliers for heads or tails); usual outcome: the high-risk scenario
results in higher no-risk allocations than the low-risk scenario.
Class size: scaleable (and tested in classes with up to n=180, with two assistants)
Time: 50 minutes (for about 10 rounds of play)
Variations: none mentioned
See also: Money games

 

Game: #152
Course: Game Theory
Level: Intermediate
Subject(s): Rules of game; strategic player; role of information
Objective: To understand the “should you switch doors?” Monty Hall game
Reference and contact: Brokaw, Alan J. and Thomas E. Merz. “Active Learning with Monty Hall in a Game Theory Class.” Journal of Economic Education Vol. 35, No. 3 (Summer 2004), pp. 259-268.  [online: http://www.indiana.edu/~econed/issues/v35_3/5.htm]
Abstract: Two-person, sequential game with perfect information; instructor chooses two students at random who are to retrieve an envelope  placed in the building; after retrieval, two other identical envelopes are placed on the desk; two envelopes contain cents-off coupons); one envelope contains $10; the two students are to point to one of the three envelopes that they wish to choose to open; the instructor then opens one of the other two envelopes (that contains coupons) and asks whether the students wish to switch their choice from the envelope they pointed at to the remaining envelope on the desk; if desired, the audience can give advice to the students; lively debate ensues – with almost never the game-theoretically correct reasoning; after the envelope is chosen, explain the correct answer as outlined in the article.
Class size: small to very large
Time: less than one class period
Variations: none mentioned
See also: Game Theory games

 

Game: #153
Course: Macro
Level: Principles and up
Subject(s): Inflation
Objective: To illustrate the derivation of a consumer price index and its potential biases.
Reference and contact: Hazlett, Denise and Cynthia D. Hill. “Calculating the Candy Price Index: A Classroom Inflation Experiment” Journal of Economic Education. 34(3), Summer 2003, pp. 214-223. [online: http://www.indiana.edu/~econed/issues/v34_3/5.htm]
Abstract: Students develop a consumer (fixed-weight) price index based on purchasing decisions made by fellow students and can observe substitution, quality, and new-product CPI biases.
Class size: 10-135 students
Time: One 50 minute class period
Variations: n/a
See also: Inflation games

 

Game: #154
Course: Macro
Level: Principles
Subject(s): Fiscal and Monetary Policy
Objective: Understanding and reviewing the functioning of monetary and fiscal policy instruments
Reference and contact: Mary Eschelbach Hansen (2006), “Masters of the Economy.”  ONLINE.  Available: http://academic2.american.edu/~mhansen/MastersGame. Contact: mhansen@american.edu.
Abstract: Pairs or teams of students direct fiscal and monetary policy with the goal of achieving a constant three percent growth in GDP in the economy.  The basic version provides a review of the basics of monetary and fiscal policy tools. The game prompts students to categorize policy tools as either monetary or fiscal policy.  Students then choose a specific policy action, such as a decrease in taxes, and indicate how it is expected to change GDP.  Finally, students calculate the magnitude of the desired effect.
Class size: Unlimited; played in groups of 2 to 6.
Time: One (50 minute) class period for basic game. Can be assigned as group homework.
Variations: The game has three versions; versions progress in complexity. The first variation on the basic game allows the actual effect of policy actions to differ from the intended effects through the introduction of uncertainty.  The second variation introduces the problem of coordination between fiscal and monetary authorities.
See also: Fiscal policy, Monetary policy, Economic growth

 

Game: #155
Course: Micro, Environmental Economics, Law and Economics
Level:  Intermediate and up.
Subject(s): Regulatory compliance
Objective: To illustrate how the probability and severity of enforcement affects incentives for regulatory compliance.
Reference and contact: Anderson, Lisa R. and Sarah L. Stafford, “Does crime pay? A classroom demonstration of monitoring and enforcement.” Southern Economic Journal, April 2006, Vol. 72, No. 4, pp. 1016–1025.
Abstract: Students play the role of firms that must comply with pollution regulations under varying degrees of regulatory enforcement.  The instructor, playing the role of the regulatory agency, announces the enforcement strategy prior to each decision period.  After students have made their decisions on whether to comply, the announced enforcement strategy is imposed. The baseline strategy is to randomly select one firm for inspection and, if found in noncompliance, to impose a $1000 fine.  Additional decision rounds vary the enforcement strategy by altering the probability of inspection and/or the level of the fine.
Class size: The experiment is designed for 20 “firms.”
Time: 50-minute  class
Variations: Asymmetric costs, targeted enforcement, contestable fines, and a public goods version are discussed.
See also: Institutions, Externalities

 

Game: #156
Course: Micro, Health Economics, Public Economics
Level: Intermediate and up
Subject(s): Asymmetric information and adverse selection
Objective: To illustrate that asymmetric information leads to adverse selection.
Reference and contact: Mellor, Jennifer M. “Illustrating adverse selection in health insurance markets with a classroom game.” Southern Economic Journal, October 2005, Vol. 72, No. 2, pp. 502–515.
Abstract: Students take on the role of health insurance buyers and sellers.  In part one of the game, there are two buyer types: high-risk and low-risk.  Early periods are played under full information while later periods are played under asymmetric information conditions (in which sellers must sell their policies to all buyers at the same price).  In part two of the game sellers may offer two types of health insurance policies: moderate coverage and generous coverage.  As before, the early periods are played under full information while later periods are played under asymmetric information.
Class size: Groups of 10 to 35 students.
Time: One 75-minute period to run both parts of the game.
Variations: n/a
See also: Information games

 

Game: #157
Course: Micro, Public Finance, Urban Economics, Law and Economics
Level: Intermediate and up
Subject(s): Public goods, Tiebout Hypothesis, Median Voter
Objective: Illustrates the efficiency consequences of the provision of local public goods under conditions of mobility and voting.
Reference and contact: Hewett, Roger, Charles A. Holt, Georgia Kosmopoulou, Christine Kymn, Cheryl X. Long, Shabnam Mousavi, and Sudipta Sarangi.  “A Classroom Exercise: Voting by Ballots and Feet.” Southern Economic Journal, July 2005, Vol. 72, No. 1, pp. 253–263.
Abstract: Students are divided into five communities with one member from each chosen as the community’s mayor.  A deck of playing cards is used to induce preferences over four different public goods (corresponding to the different suits).  Each student receives three cards and the sum of cards of a given suit determines the value of the public good.  Students are then allowed to move to a community that provides a level of the public good to their tastes as determined by a majority vote. The cost of the public good is divided equally among all community members.  The game is repeated for several rounds until students sort themselves into their preferred communities.
Class size: 15 to 30 students, though the setup can be amended to handle larger classes.
Time: A 50-minute class for experiment and discussion.
Variations: n/a
See also: Public goods games

 

Game: #158
Course: Micro, Public Finance, Public Choice
Level: Principles and up
Subject(s): Median voter, Political equilibrium
Objective: To illustrate the equilibrium prediction of the median voter model.
Reference and contact: Wilson, Rick K. “Classroom Games: Candidate Convergence,” Southern Economic Journal, April 2005, Vol. 71, No. 4, pp. 913–922.
Abstract: Students take on the role of either candidate or voter in a series of elections over a single issue.  In each election period, two students are randomly chosen as candidates. A flip of the coin determines which candidate is the incumbent.  The incumbent chooses their policy position first; the challenger can not choose the same position as the incumbent.  The rest of the students then vote for the candidate of their choice using a majority rule for determining the winner.  The election cycle is repeated by randomly choosing a new challenger to face the winner of the election.
Class size: Any size.
Time: 30 minutes for the experiment.
Variations: Later rounds introduce a shift in the preferences of voters.
See also: Public choice games

 

Game: #159
Course: Micro, Industrial Organization, Environmental Economics
Level: Principles and up.
Subject(s): Price discrimination
Objective: To illustrate the social welfare consequences of price discrimination.
Reference and contact: Michael, Jeffrey,  Arthur Zillante, Sarah Stafford, Greg Buchholz, Katherine Guthrie, and Julia Heath. “The Campus Parking Game: A Demonstration of Price Discrimination and Efficiency.” Southern Economic Journal, January 2004, Vol. 71, No. 3, pp. 668–682.
Abstract: Students are divided into four types of commuters: faculty, and three different student types.  There are four parking lots available.  Each commuter has difference preferences over the different parking lots.  For the first decision session, the instructor announces a uniform price schedule for all lots that ensures all commuters will find a parking spot.  Using index cards to represent their cars, students park their car by putting their index card in a box representing their preferred lot.  If a lot is over capacity, the necessary cars are randomly removed and each commuter is charged a search cost.  The session continues until all commuters find a parking lot or decide to stay home.  Later sessions introduce a uniform profit-maximizing price, third-degree price discrimination, a hybrid third-degree price discrimination, and a second-degree price discrimination scheme.
Class size: Any number.
Time: One 50-minute class period.
Variations: Introducing parking attendants that can negotiate parking fees for each lot; having students serve as a parking committee that must determine prices.
See also: Monopoly games

 

Game: #160
Course: Macro
Level: Principles and up.
Subject(s): Unemployment
Objective: To demonstrate how unemployment compensation affects unemployment rates and wages.
Reference and contact: Hazlett, Denise. “A classroom unemployment compensation experiment.” Southern Economic Journal, January 2004, Vol. 70, No. 3, pp. 694–704.
Abstract: Students participate in two labor markets (skilled and unskilled) using the double oral auction mechanism as either workers or employers.  Phase I of the experiment involves no government intervention.  Phase II of the experiment introduces unemployment compensation
Class size: Works best with 16 to 50 students, though it has been run with 12 to 90 students.
Time: One 50-minute class period.
Variations: Wage subsidies to employers or employees; a minimum wage
See also: Unemployment and Labor Market games

 

Games Economists Play: Games 161 – 170

Game: #161
Course: Micro
Level: Principles and up
Subject(s): Network externalities
Objective: To demonstrate how network externalities can lead to “lock-in.”
Reference and contact: Ruebeck, Christopher, Sarah Stafford, Nicola Tynan, William Alpert, Gwendolyn Ball, Gwendolyn, and Bridget Butkevich. “Network externalities and standardization: a classroom demonstration.” Southern Economic Journal, April 2002, Vol. 69, No. 4, pp. 1000–1008.
Abstract: Students play consumers in a one-sided market choosing between two competing technologies.  The number of students choosing a particular technology determines the payoff to each chosen technology.  Thus, the game demonstrates how network externalities can lead to the “lock-in” phenomenon.
Class size: Any size, though authors claim the game effects are more observable with at least 20 students.  Larger classes can be broken into teams.
Time: One class period.
Variations: Noisy information, switching costs, communication, brand names, among others, can be introduced.
See also: Information and Externality games

 

Game: #162
Course: Macroeconomics and Money and Banking
Level: Principles and up
Subject(s): Quantity theory of money.
Objective: To demonstrate the impact of money on the price level.
Reference and contact: Holleran, Philip, Taylor, Barbara J. and Santopietro, George D., “Does Active Learning Improve Student Performance? Results of a Quantity Theory Game” (November 2006). Available at SSRN: http://ssrn.com/abstract=951244
Abstract: Students are randomly allocated five poker chips of varying color (red, white, blue) to serve as money in a series of auctions.  Chip values for the first series of auctions are: red = 25, white = 50, and blue = 100.  Candy and granola bars are then auctioned off with prices posted on the chalkboard.  For the second series of auctions, students exchange their poker chips with another student and a new set of values are revealed: red = 50, white = 100, and blue = 200.  Predictably, the prices of the candy and granola bars will approximately double.
Class size: Any size.
Time: 20-30 minutes for play and discussion.
Variations: None indicated.
See also: Inflation and Money games

 

Game: #163
Course: Environmental economics
Level: Intermediate and up.
Subject(s): Environmental and natural resource economics
Objective: Demonstrates how externally imposed rules can be counter-productive, whereas nonbinding communication can be effective in dealing with local environmental problems.
Reference and contact: Murphy, James J.,  and Juan-Camilo Cardenas. “An Experiment in Enforcement Strategies for Managing a Local Environment Resource.” Journal of Economic Education, Volume 35, No. 1, Winter 2004, pp47-61.
Abstract: Students are randomly assigned to groups of eight.  Each student must decide how many “months” to spend collecting “firewood” from the forest.  According to their payoff matrix, each student’s payoff varies inversely with the total months of firewood collection by other group members. Three treatments are conducted: open access with no communication, regulation with random monitoring, and open communication.
Class size: Any size providing that group sizes range from 4 to 8 students.
Time: For a 75-minute class, 15 to 20 periods divided into three treatments can be completed.
Variations: Details for using smaller group sizes are provided.
See also: Externality games

 

Game: #164
Course: Microeconomics
Level: Principles and up.
Subject(s): Labor market discrimination.
Objective: To illustrate statistical discrimination in hiring and investment decisions.
Reference and contact: Fryer, Roland G. Jr., Jacob K. Goeree, Charles A. Holt. “Experience-Based Discrimination: Classroom Games.” Journal of Economic Education. Volume 36, No. 2. Spring 2005, pp160-170.
Abstract: A web-based game in which students are randomly designated as employers, purple workers, or green workers.  This environment may generate “statistical” discrimination if workers of one color tend not to invest because they anticipate lower opportunities in the labor market, and these beliefs are self-confirming as employers learn that it is, on average, less profitable to hire workers of that color.
Class size: Any multiple of four (two employers and a purple and green worker).
Time: Web-based version: 30 minutes for instructions and 20 periods.
Variations: A “manual” version of the experiment is briefly detailed in the endnotes.
See also: Labor market games

 

Game: #165
Course: Microeconomics and Labor economics.
Level: Principles and up.
Subject(s): Compensating wage differentials.
Objective: To illustrate how wages adjust to differing job characteristics.
Reference and contact: Eckel, Catherine, Melayne Morgan McInnes, Sara Solnick, Jean Ensminger, Roland Fryer, Ronald Heiner, Gavin Samms, Katri Sieberg, Rick Wilson. “Bobbing for Widgets: Compensating Wage Differentials.” Journal of Economic Education, Spring 2005, Volume 36, No. 2, pp129-138.
Abstract: Pairs of students must complete two tasks in order receive a monetary (real or hypothetical) payoff.  Students must negotiate the division of the payoff between the two tasks–one of which is “pleasant” and the other which is “unpleasant.”
Class size: Any size.
Time: 50-minute class
Variations: Changing the relative unpleasantness of the tasks, imposing comparable worth mandates, and implementing safety regulations.
See also: Labor market games

 

Game: #166
Course: Microeconomics and Public Finance
Level: Principles and up.
Subject(s): Public goods and the Tiebout hypothesis.
Objective: To illustrate the efficiency gains that local sorting provides in a public goods setting.
Reference and contact: Brouhle, Keith,  Jay Corrigan, Rachel Croson, Martin Farnham, Selhan Garip, Luba Habodaszova, Laurie Tipton Johnson, Martin Johnson, and David Reiley. “Residential Sorting and Public Goods Provision: A Classroom Demonstration.” Journal of Economic Education, Volume 36, No. 4, Fall 2005, pp332-344. Available online: http://economics.kenyon.edu/corrigan/tiebout/tiebout.htm.
Abstract: Students with differing preferences over a public good must vote on the provision and financing of the public good over a four period sequence.  A simple weighted-average voting rule determines the actual provision of the public good.  In period one, the entire class is treated as a single community.  In period two the class is divided in half with an uneven distribution of student-types.  Period three allows limited mobility between communities and period four allows unlimited mobility.
Class size: Anywhere between 6 and 100 students, but the ideal class size is probably between 20 and 40.
Time: 50-minute class for the experiment and discussion.
Variations: Introducing multiple public goods and allow an endogenously determined number of communities; use different voting rules
See also: Public goods games

 

Game: #167
Course: Micro
Level: Principles and up.
Subject(s): Entry and exit.
Objective: To demonstrate the long-run equilibrium adjustment process with price-taking firms.
Reference and contact: Cheung, Stephen L. “Classroom Entry and Exit Game of Supply with Price Taking Firms.” Journal of Economic Education, Volume 36, No. 4, Fall 2005, pp358-368.
Abstract: Students, acting as price-taking firms, must decide whether or not to enter a market.  Each firm operates with a firm-specific fixed cost of production and an increasing marginal cost.   After the decision to enter is made, the instructor determines the market price based on the number of entrants.  Firms then choose their output level and profits. Subsequent rounds follow.
Class size: Designed for 20 “firms” of three students each, though game is scalable for smaller or larger classes.
Time: 50-minute class for the game and discussion.
Variations: None described.
See also: Competitive entry games

 

Game: #168
Course: Micro, Public Finance
Level: Principles and up
Subject(s): Public goods
Objective: To illustrate the free-rider problem and the use of a provision point mechanism as a possible solution.
Reference and contact: Marks, Melanie, David Lehr, and Ray Brastow. “Cooperation versus Free-Riding in a Threshold Public Goods Classroom Experiment.” Journal of Economic Education, Volume 37, No. 2, Spring 2006, pp156-170.
Abstract: In contrast to traditional public goods games in which the level of a public good is determined by the sum of the voluntary contributions made by individuals, this experiment utilizes a threshold mechanism.  If student contributions to the public good exceed a minimum target, then all students equally share a bonus payoff; otherwise, all contributions to the public good are refunded to each student’s private account.
Class size: Game works best with smaller class sizes, though game can accommodate larger classes by teaming students up.
Time: One 50-minute class period for experiment and discussion.
Variations: Instructors could introduce reputation effects, alternative reward mechanisms, different information sets, and by varying the number of decision periods.
See also: Public goods games

 

Game: #169
Course: Micro
Level: Principles and up.
Subject(s): Non-price allocation.
Objective: To illustrate the welfare effects of first-come, first-served allocation mechanisms.
Reference and contact: Alden, Lori. “Rationing a “Free” Good: A Classroom Experiment.” Journal of Economic Education, Volume 37, No. 2, Spring 2006, pp178-186.
Abstract: Students must determine (1) the maximum amount of money that they would be willing to pay for a candy bar, (2) the maximum amount of time they would be willing to wait in line for the candy bar, (3)the amount of time they should wait in order to be as well off as possible.  Supply and demand curves for the candy are derived and the consumer surplus and time spent waiting are measured.
Class size: 10 to 80 students, though it’s best to allow no more than 25 active players (larger classes can team up students).
Time: 40 minutes to run the experiment.
Variations: Introduce heterogenous opportunity costs of time.
See also: Public choice games

 

Game: #170
Course: Micro, Environmental Economics
Level: Principles and up.
Subject(s): Tradable pollution permits.
Objective: To illustrate the relative cost-effectiveness of tradable discharge permits over uniform standards.
Reference and contact: Ando, Amy W. and Donna Ramirez Harrington. “Tradable Discharge Permits: A Student-Friendly Game.” Journal of Economic Education, Volume 37, No. 2, Spring 2006, 187-201
Abstract: Students are grouped into six firms with varying levels of initial emissions and are provided information on their marginal abatement cost schedules. Part one of the experiment asks that students calculate the cost of complying with uniform emission standards.  Part two introduces tradable permits that are uniformly distributed to the firms.  The instructor then acts as a Walrasian auctioneer for the tradable permits.
Class size: Up to 30 students.
Time: One 50-minute class period for experiment and discussion.
Variations: n/a
See also: Externality games

 

 

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