Chapters * Title * Contents * Introduction * Place * System * Design * Using * Future * Bibliography
Sections
* Design * Two_Simple * Sell * MULE * MULEvsMarketPlace * Incentives * Trade_Dependence * Symmetric_Commodities * Illustrating_Externalities * Showing_The_Model
Two Simple Trading Games
First, let's compare two games that are roughly about the same subject. They are both intended to teach players about how
markets clear--how markets enable people who would benefit from trading find their match. One game, however,
offers a much more interesting role to its players. This role allows the players a greater degree of agency, allowing them to
display a richer set of market behaviors.
The Market Clearing Game (DeYoung, 1993) is closely patterned on experiments done by experimental economists. Laboratory
experiments have to be carefully controlled, which practically means that subjects (and thus students) have to be tightly
constrained. Imagine six students split into two three-person groups--one of buyers and one of sellers. The three sellers are
told they can each buy one unit of a canonical good per auction for $10, $15 and $21, and the buyers are told they could resell
one unit of the good per auction (somewhere else) for $14, $20 and $25 (see below). Buyers and sellers are brought together in
an auction where sellers publicly post asking prices and buyers choose among them. After some period the auction is declared
over. The auction is repeated several times.
A Market Clearing Example
One way of looking at the above situation is that the prices represent the utility gained by each of the players by having one
unit of the good. The question is then who should trade with whom in order to maximize the total value of the units of goods to
everyone? In other words, if seller A sells a unit to buyer 3 for $20, seller A is $10 better off and buyer 3 is $5 better off
- a total of $15 is gained. If, however, seller A sells a unit to buyer 1 for $12, the total gain is only $4. To maximize the
total gain overall, it is clear (if you work out the cases) that seller A and B should sell to buyers 2 and 3, and that buyer 1
and seller C shouldn't trade (that creates the maximum total gain of $20.) The question is would a set of buyers and sellers
trying to maximize their local return arrive at the same globally optimum answer?
The classroom experiment is intended to show that the answer is yes. A version of the above problem is run where there are
eighteen buyers and sellers. Five rounds are run and in short order the optimum set of buyers and sellers start trading.
While this result is interesting, the impoverished social setting for the game limits the kinds of connections students can and
ought to make between it and the real world. This limitation is thrown into highlight when the Market Clearing Game is compared
to another simple trading game.
The Market Exchange and Wealth Distribution Game (Bell 1993) is a seemingly simple game with surprisingly rich implications.
Students trade M&M's. Like the Market Clearing Game above, students differ in the utility (here represented by game points)
they derive from the M&M's. Instead of being assigned the utility value individually, they derive it from their present
stock of candy. The third (and sixth and ninth and so on up to fifteenth) M&M in a group get its owner a point bonus. Thus
if player 1 has two red and one green and player 2 has one red and two green they can both gain by swapping a green for a red
M&M. No globally visible reflection of the total state is kept. Students thus have to ferret out advantageous trades and
convince people to engage in them.
One additional feature is added. Students start with one of three initial stocks of candy reflecting their membership in one of
three groups: poor, middle class or rich.
Students pursued the game at different levels of intensity. Players saw the importance of salesmanship in determining who got
to trade. Students formed consortia to pool their candies increasing their opportunities for gain--seeing the interaction of
non-market schemes for organization with market ones. Although the economic message in the two games is similar (markets can
foster exchanges that move the system towards a total welfare maximum), the second game's openness to student modification
makes it much more evocative.
Greg Kimberly/gregkimb@gak.com