Assumptions of the Apple Market
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Each “demander” can buy only one apple (per trading round); a “demander”
does NOT have to buy an apple
A “demander’s” Buyer Value is his/her maximum-willingness-to-pay for an
apple;
A buyer’s (demander’s) profit (consumer surplus) is the difference between the
buyer’s value and the price negotiated;
Each “supplier” can sell only one apple (per trading round); a “supplier does
NOT have to sell an apple;
A “supplier’s” Seller Cost is the minimum price she/he is willing to accept for an
apple (assume the “supplier” does not realize the Seller Cost unless she/he
actually sells an apple - the apple is not produced unless there is an advanced
order);
A “supplier’s” profit is the difference between price and seller cost;
During Session 2, a $15 tax is imposed on the “supplier” when she/he sells an
apple (the Seller should think of the tax as a $15 increase in her/his SC);
During Session 3, a $15 tax is imposed on the buyer when he/she buys an
apple (the Buyer should think of the tax as a $15 reduction in his/her Buyer
Value).