Dr. Tesa Stegner
Fairness / Ultimatum Game
This activity demonstrates how fairness influences people’s decisions. Students are paired up with one student of each pair given an amount of money that he/ she needs to decide how to split. The other partner then has the choice of either accepting or rejecting the offer. This is repeated with different partners and amounts of money. This leads to a discussion of fairness and the impact of unequal income distributions.
Game Theory / Prisoners Dilemma
This activity is used to explain how a small number of firms must consider the actions of the other firms in the industry when making decisions such as pricing and advertising levels. Activity has student play the prisoners dilemma game where they are caught stealing a television and must decide whether to confess or not. Time permitting, this is followed by some dramatic game show clips demonstrating this dilemma.
Students determine what type of information is used when choosing which products to buy. Several food items are brought in for students to consider the price and taste of some products and packaging (advertising) of others when ranking these products from most preferred to least preferred. This activity is followed up by a discussion on the influence of advertising and the type of advertising expected for different types of products.
Market for Lemons / Asymmetric Information
Students are split into buyers and sellers of a product (used cars) where some of these cars are “lemons.” The buyers of the cars do not know whether the car they are purchasing is a lemon. Subsequent rounds of this activity allow students to purchase information about the car. This activity leads to a discussion of truth in advertising requirements and the problem of adverse selection that exists whenever one side of the market has better information than the other.
Students decide how to allocate their tokens between a private account and a public account that will benefit everybody. This activity leads to a discussion on how the non-exclusion property of public goods leads to a free rider problem that can cause the market to fail.
The popular board game, Monopoly, is adapted to show students how the allocation of resources and wealth affects economic growth and their well-being. Students are given different initial allocations of money and properties and salaries to illustrate difficulties that can arise for those toward the bottom of the income distribution. A few rounds of the game are followed by a discussion on income inequality and its policy implications.