A Trading Pit Market Experiment

This week, we are adding a Trading Pit Market Experiment, a la Vernon Smith, including price ceilings and price floors, and unit taxes.

The experiment is based on this guide  (written by Antonio Cabrales for the coreecon manual). An extended version, including several countries and international traders will be introduced in a few weeks.

The Trading Pit Market Experiment


First page of the guide of the experiment (A. Cabrales for coreecon):

“This experiment is used to introduce students to the working of competitive markets. As The Economy explains in more detail in unit 8, the experiment was first run in 1948 by Edward Chamberlin, whose results were quite different from what equilibrium theory would predict. Later, at the beginning of the 1960’s, Vernon Smith reran the experiments with two key innovations: firstly the prices of agreed trades were made public, the second was to repeat the game several times, with the participants keeping the same valuation in each round. Both the design of the history and the experiment serve various pedagogical objectives, which we now discuss.

  1. The experiment is actually quite different from the way many students picture “demand and supply” when one teaches it to them. It is important that they understand that models are useful to represent situations that are not obviously connected to the model.
  2. It shows that the theory we explains gives empirically validated conclusions. They are in fact more likely to believe the results are true, if they have behaved in the way the theory predicts.
  3. In conjunction with the history of the experiment, it also demonstrates that, as we point out in unit 5, “the rules of the game matter”. It was only when Vernon Smith changed the way the games was played that the behaviour was in accordance with the theory.
  4. As per the previous point, it also shows that empirical work sometimes needs to be persistent and one needs to try many things until one can be sure what makes a particular “treatment” work, and when it does not.

The game should ideally be played before the theory about markets is introduced, to avoid the risk that knowing the theory might affect how some students play. It can be played in quite large groups (at University College London and Universitat Pompeu Fabra groups of 300-400 students have played it successfully), but it works in groups as small as a dozen people (as in Universidad Carlos III)…”

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Inter-University Student Tournament: Ranking


… And the Winner of the Economics Tournament is … HEC Montréal !!

Toulouse School of Economics, who was 1st from Year 2 to Year 4, ends the game at the 2nd place.

Cardiff Metropolitan University also stands on the podium with a great 3rd place!




Here is the complete ranking of the Final:

  1. HEC Montréal
  2. Toulouse School of Economics
  3. Cardiff Metropolitan University
  4. CentraleSupélec
  5. Universidad de Málaga
  6. Ecole Centrale de Marseille
  7. Ecole Nationale Polytechnique (ENP) – Algeria
  8. University of Glasgow
  9. IMT Atlantique
  10. Athens University of Economics and Business
  11. Aston University

ENSAE ParisTech was also qualified to the Final.


Congratulations to you all, this was a hard competition! Among the 31 teams, from 14 countries, who registered, 24 finished the qualification game and 12 qualified to the Final.


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Inter-University Student Tournament : Qualification for the Final

The 12 teams to qualify for the finals are (unranked list) :

  • Cardiff Metropolitan University
  • Aston University
  • HEC Montréal
  • CentraleSupélec
  • École nationale de la statistique et de l’administration économique
  • Athens University of Economics and Business – Οικονομικό Παν. Αθηνών
  • University of Glasgow
  • Universidad de Málaga
  • Ecole Nationale Polytechnique d’Alger
  • Toulouse School of Economics
  • IMT Atlantique
  • Ecole Centrale de Marseille



It was a pretty hard competition between the 31 teams that registered. Qualifying required a score above 1 313 343 € .

We would like to thank the teams who did not qualify, for taking part in our tournament and we hope that you found it fun!

Scores are now reset, for the finals that will take place next week. Qualified Teams will receive instructions in the next hours by regular email.

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Economics Games : Inter-University Student Tournament!

We are launching a new (free) inter-university student tournament, based on an industrial organization simulation (close to those that are described here: https://lud.io).

The qualification phase consists in playing 6 years of a mono-player simulation, between now and before November the 23th, 2017 (vs robots behaving like humans did, in previous experiments) .  You can play when you want, at your own pace. The 12 best teams will be qualified for the finals (and scores will be reset).

The finals will be played between November the 27th and December the 2nd, 2017: Players will have to enter one decision every day, before 21h CET.

Both phases are played online.




The winning team will be awarded a voucher around 300€ as a first prize (on amazon or a similar site).

Students can participate on their own, with no need of support from their instructors: The game will require some strategic thinking but there is no prerequisite in economics.
This should be fun, so join the tournament!

One team (2-4 players) from any university or school is welcome to participate (Registration is now closed)

You can also register to the facebook event, to stay informed: https://www.facebook.com/events/1963638390559162

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“Can Contracts Solve the Hold-Up Problem?”

This week, we are adding “Can Contracts Solve the Hold-Up Problem?” by Eva Hoppe and Patrick Schmitz (Games and Economic Behavior 2011).

The paper is available on the site of the journal, and the game is in the “industrial organization section” on our site.




Abstract of the paper:

In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem, in particular when renegotiation cannot be prevented. Ultimately, this question has to be answered empirically. As a first step, we have conducted a laboratory experiment with 960 participants. We consider investments that directly benefit the non-investing party. While according to standard theory, contracting would be useless if renegotiation cannot be ruled out, we find that option contracts significantly improve investment incentives compared to a no-contract treatment. This finding might be attributed to Hart and Mooreʼs (2008) recent idea that contracts can serve as reference points.”

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“Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market.”

This week, we add an asymmetric information trading game, derived from Biais, Hilton, Mazurier, Pouget (RES 2004) and Plott & Sunder (Econometrica 88).

The paper is available on the site of the journal, and the game is in the “finance section” on our site.




Abstract of the paper:

We measure the degree of overconfidence in judgement (in the form of miscalibration, i.e. the tendency to overestimate the precision of one’s information) and self-monitoring (a form of attentiveness to social cues) of 245 participants and also observe their behaviour in an experimental financial market under asymmetric information. Miscalibrated traders, underestimating the conditional uncertainty about the asset value, are expected to be especially vulnerable to the winner’s curse. High self-monitors are expected to behave strategically and achieve superior results. Our empirical results show that miscalibration reduces and self-monitoring enhances trading performance. The effect of the psychological variables is strong for men but non-existent for women.”

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“Teaching Collective Action Problems without Contextual Bias: The Red/Green Simulation”

This week we are adding the Red/Green Simulation, by James R. Bruehler, Alan P. Grant, and Linda S. Ghent (Journal of Economics and Finance Education 2017).

The paper is available on the site of the (open access) journal, and the game is in the “externalities and public goods section” on our site.




Abstract of the paper:

“Collective action problems are at the heart of many economic issues. Often, students have trouble comprehending how society ends up with a less than optimal outcome, and may incorrectly assume that someone must want the outcome that occurs. Correcting this error is made difficult by the biases that students bring to these issues.
The Red/Green simulation demonstrates the tension between self-interest and the social good in a context-free manner allowing students to see that these sub-optimal outcomes may not be desired by anyone, but instead can result from unhealthy systems of incentives.”

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