“The Carbon Trading Game”

This week, we are adding “The Carbon Trading Game” by Roger Fouquet (Climate Policy 2003), on our site, in the “Externalities and public goods” section.



Abstract of the paper:

“In response to the Kyoto Protocol, an international market for carbon dioxide tradable permits is likely to be created. Two of the key issues involved are explaining the concepts of tradable permits to industrialists, policy-makers and the man on the street, and anticipating how the market will evolve. A simple game of the market for carbon dioxide tradable permits has been developed and used that can help deal with both issues. As a pedagogical tool, this game benefits from simplicity (just a few pieces of paper are needed) and enables students to grasp the concepts and remember them through the intensity and fun of a trading ‘pit’. The experiences also provide substantial insights into the evolution of the carbon dioxide permit market, particularly related to the evolution of trade volume, permit prices and country strategies.”
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Mooc “Manage Your Prices: an Introduction to Pricing Strategy and Revenue Management”

A MOOC about Pricing and Revenue Management, by Christophe Bontemps, Nathalie Lenoir and ENAC, and involving some of our simulations, starts today on FutureLearn:



How do airlines, hotels, resorts and other organisations manage their prices? Why are these prices apparently unrelated to costs and different for each consumer? And what are the underlying reasons and processes behind these prices?

Open the black box of pricing strategy and revenue management



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“Patents and R&D: A Classroom Experiment”

This week, we are adding “Patents and R&D: A Classroom Experiment” by Amy McCormick Diduch ( International Review of Economics Education 2010), on our site, in the industrial organization section.




Abstract of the paper:

“Public policy towards patents has assumed a robust positive relationship between the strength of patent protection and the level of innovative research effort even though economic theory and empirical evidence suggest that the impact of patents on research varies considerably by industry.This classroom experiment provides students with an introduction to two competing models of the impact of patents on R&D: the ‘winner-take-all’ model contains incentives for excessive research effort and the ‘knowledge spillover’ model contains incentives for free riding. Class discussion explores potential changes to current patent policy and policy alternatives for stimulating R&D.”
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“When do first-movers have an advantage? A Stackelberg classroom experiment”


This week, we are adding “When do first-movers have an advantage? A Stackelberg classroom experiment”, by Robert Rebelein and Evsen Turkay (JEE 2016), on our site, in the industrial organization section.




Abstract of the paper:

“The timing of moves can dramatically affect firm profits and market outcomes. When firms choose output quantities, there is a first-mover advantage, and when firms choose prices, there is a second-mover advantage. Students often find it difficult to understand the differences between these two situations. This classroom experiment simulates each scenario in a way that makes it easy for students to understand the theoretical reasons for the different possible outcomes. The authors have developed a two-firm classroom experiment where students first play a Stackelberg game in which firms sequentially choose production quantities and then a Stackelberg game in which firms sequentially choose prices. When choosing quantities, it is advantageous to move first, and when choosing prices, it is advantageous to wait.”

(JEE 2016: http://www.tandfonline.com/doi/abs/10.1080/00220485.2016.1179144 )


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“Policies with varying costs and benefits: A land conservation classroom game”


This thursday, we are adding “Policies with varying costs and benefits: A land conservation classroom game”, by Sahan Dissanayake and Sarah Jacobson (JEE 2016), on our site (“Externalities and public goods” section).




Abstract of the paper:

“Some policies try to maximize net benefits by targeting different individuals to participate. This is difficult when costs and benefits of participation vary independently, such as in land conservation. The authors share a classroom game that explores cases in which minimizing costs may not maximize benefits and vice versa. The game is a contextually rich pedagogical tool, putting students in the role of landowners who must decide whether to conserve land in different policy environments: flat conservation payments, agglomeration bonuses, and a conservation auction. Students learn about specific issues in land conservation, ecosystem services, preferences for nonmoney outcomes, and general issues in policymaking. The game is suited to classes in environmental, resource, agricultural, and policy economics, and more general classes in microeconomics and public policy”

(JEE 2016: http://www.tandfonline.com/doi/abs/10.1080/00220485.2016.1146098 )

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“A Classroom Investment Coordination Experiment”


Last week, we added “A Classroom Investment Coordination Experiment” by Denise Hazlett (IREE 2007 , the paper is dowloadable here https://www.economicsnetwork.ac.uk/iree/v6n1/hazlett.pdf)



Abstract of the paper:

“In this classroom experiment students represent firms that make investment decisions. They play a repeated game with each firm privately choosing its level of investment. Participating in the experiment helps students understand theories that posit coordination failure as the cause of economic fluctuations. Students see that when firms expect a recession, their resulting low levels of investment actually cause a recession. Likewise, when firms expect an expansion, their resulting high levels of investment cause an expansion. The experiment can be used in undergraduate principles or intermediate macroeconomics classes of 8–60 students…”

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“Design a contract! : A simple principal-agent problem as a classroom experiment”


Two weeks ago, we added a new classroom experiment, “Design a contract! : A simple principal-agent problem as a classroom experiment”, by Simon Gächter & Manfred Königstein (JEE 2009) on our site (information asymmetry section).




Abstract of the paper:

“The authors present a simple classroom experiment that can be used as a teaching device to introduce important concepts of organizational economics and incentive contracting. First, students take the role of a principal and design a contract that consists of a fixed payment and an incentive component. Second, students take the role of agents and decide on an effort level. The experiment illustrates shirking opportunities of the agent and the importance of work incentives. Furthermore, it can be used to introduce students to the concepts of contractual incompleteness, efficiency, incentive compatibility, outside options and participation constraints, the Coase theorem, and the potential roles of fairness and reciprocity in contracting.”

(JEE 2009: http://www.tandfonline.com/doi/abs/10.3200/JECE.40.2.173-187 )


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New: Two simulations, on monopoly pricing and on perfect competition.

Three weeks ago, we added a simulation about monopoly pricing, marginal and sunk costs and price-elasticity of demand on our site.

The player is a monopoly on a given market, and must decide how many goods to produce and what price to set. Marginal and fixed costs change from one round to the other. In round 5, demand gets less elastic.




We also added a second simulation about perfect competition.




The player manages a small firm that competes with many other on a market. From consumers’ perspective, products of all firms are identical. Consumers are also informed about each firm’s price and there are no transportation costs: Consequently, they buy to the firms with the lowest price. The player knows that its competitors’ prices are stable and equal to $180k per unit and must decide what price to set and how much to produce. In round 3, the fixed production cost increases and the player must decide how to react to that.

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