Trading Game: Investigation on Supply & Demand Shelly Bok.
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Transcript of Trading Game: Investigation on Supply & Demand Shelly Bok.
Trading Game: Investigation on Supply & DemandShelly Bok
First Round: total 32 transactions
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60 $4.50 4$4.40 3$4.30 11$4.20 4$4.10 $4.00 9$3.90 $3.80 $3.70 $3.60 1$3.50 $3.40 $3.30
Second Round: total 42 transactions
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60 $4.50 2$4.40 2$4.30 19$4.20 6$4.10 5$4.00 8
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
Third Round: total 46 transactions
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60
$4.50 $4.40 2$4.30 26$4.20 11$4.10 1$4.00 6
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
Analysis of the first three rounds
Market is stabilizing itself with an equilibrium price
We see that the graphs are less spread and more center-ed
Fourth Round: total 18 transactions$5.40
$5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60
$4.50
$4.40
$4.30
$4.20
$4.10
$4.00
$3.90
$3.80 $3.70 18
$3.60 $3.50 $3.40 $3.30
Price Ceiling
Prices can’t go up
Shortage of Supply
Buyers want to use this opportunity of price decrease to buy buy buy
Fifth Round: total 8 transations$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 8$4.80 $4.70 $4.60
$4.50
$4.40
$4.30
$4.20
$4.10
$4.00
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
Price Floor
Price can’t go down
Surplus of Supply
Buyers do not want to buy anymore because of the large price. Therefore, the transactions
decreased from 18 to 8
Sixth Round: total 29 transations
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60
$4.50
$4.40 $4.30 4$4.20 14$4.10 5$4.00 6
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
50¢ tax on buyers
Demand decreases
Graph is skewed left : preference to lower price because buyers
have the burden of tax
Seven Round: total 19 transactions
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60
$4.50 $4.40 5$4.30 10$4.20 3$4.10 1$4.00
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
50¢ tax on sellers
Supply decreases
Graph is skewed right: preference to higher price Because the sellers
have the burden of tax
Even though the buyers are “helping” the sellers, we see the number of transactions to decrease from 29 to 19
Eighth Round: total 49 transactions
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60 $4.50 3$4.40 3$4.30 19$4.20 9$4.10 3$4.00 12
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
Market’s normal behavior resumes
Back to the robust search for equilibrium
Ninth Round: total 69 transactions
$5.40 $5.30 $5.20 $5.10 $5.00 $4.90 $4.80 $4.70 $4.60 $4.50 2$4.40 7$4.30 24$4.20 16$4.10 3$4.00 17
$3.90
$3.80
$3.70
$3.60 $3.50 $3.40 $3.30
Final Analysis
Even without communication, participants now acknowledge that the equilibrium price is 4.30$. The easiest price to negotiate
Therefore we see our mode as 4.30$
Equilibrium is automatic
Game rules for a Supply and Demand Graph!
With the existing game rules, the supply and demand graph cannot be exactly drawn. Only a graph with an equilibrium price can be drawn (the other
transactions that are not at the eq. price will be ignored) There is no data for quantities higher than “1” quantity.
In order to have a supply and demand graph, quantities cannot be “1.”
Sellers have to sell more than 1 quantity supplied and buyers have to buy more than 1 quantity demanded.
If the instructor gives the amount of quantities buyers and sellers have to buy and sell, we will get a graph that is accurate with not only equilibrium price but also the other transactions made.