Experiments
and the Economics Classroom
11th Annual Economics Teaching Workshop
UNC, Wilmington
Tisha Emerson
Baylor University
October 8, 2011
Session Outline
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What is an Experiment?
Why use Experiments?
Participate in an International Trade Experiment
Debrief the Experiment
Best Practices for Implementing the
Experimental Pedagogy
What is an Experiment?
 An activity that asks students to make
economic decisions by putting them in the
role of buyers and sellers.
 Student decisions create data that can then
be used for analysis and further illustration
of economic concepts.
Why Experiments?
 Evidence suggests that experiments lead to higher
student achievement and learning.
 Gremmen & Potters (1997); Frank (1997)
 Emerson & Taylor (2004)
 Dickie (2006)
 Ball et al. (2006)
 Durham et al. (2007)
 Experiments increase student involvement,
discussion, and engage them in the learning
process.
 Experiments can foster a sense of community in
the classroom.
 They are fun! Both students and instructors enjoy
them.
Simulation Instructions
 Participants will be given a private information slip
that describes their role in the experiment, including
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The country in which they reside
Whether they are a buyer or a seller
Their reservation price
 The experiment will consist of a number of market
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rounds in which participants may buy (or sell) at
most one unit of the good. Only whole units may be
traded.
Participants will negotiate for trades so as to
maximize their earnings.
Calculation of Earnings
 Buyers’ earnings are the difference between the
value on their information slip and the price they
negotiate for the good.
Buyer Earnings  Value  Price
 Sellers’ earnings are the difference between the price
they negotiate to sell the good for and their cost of
producing the good (from their information slip).
Seller Earnings  Price  Cost
 If a buyer or seller fails to negotiate a trade, their
earnings for that period are zero.
Simulation Instructions
 Once a trade is negotiated, participants will:
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Report their trade to me at the front of the room and I
will post their trade information.
Record their earnings on their record sheet (back of
instructions).
Participants will then wait for the trading round to
conclude.
 At the end of the experiment, the four highest
earners will receive a prize!
Trading Instructions
 Buyers can call out offers to buy by saying, for
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example, “Buy at 15”.
Sellers can call out offers to sell by saying, for
example, “Sell at 42”.
In the initial rounds, trades can only be made
between buyers and sellers from the same
country.
Trading periods are 3 minutes.
Let’s Play …
Debriefing the Experiment
Provide students with the buyer values and
seller costs and use these to graph the demand
and supply curves for the good in each country.
Compare predicted outcomes with
experimental outcomes including price,
quantity, and surplus.
Predict which participants will and will not be
able to trade. How do the predictions compare
to the experimental outcomes?
How does the liberalization of trade affect total
surplus? Are all participants made better off?
Predicting the Equilibrium Outcome: Country X
$ 12.00
$ 10.00
Price
$ 8.00
Demand
Supply
$ 6.00
$ 4.00
$ 2.00
$ 0.00
0
5
10
Quantity
15
20
Predicting the Equilibrium Outcome: Country Y
$ 7.00
$ 6.00
Price
$ 5.00
Demand
Supply
$ 4.00
$ 3.00
$ 2.00
$ 1.00
$ 0.00
0
5
10
Quantity
15
20
Predicting the Equilibrium Outcome
Supply and Demand with Trade (56 Participants)
$ 12.00
$ 10.00
Price
$ 8.00
Demand
Supply
$ 6.00
$ 4.00
$ 2.00
$ 0.00
0
5
10
15
Quantity
20
25
30
Computerized Experiments - Aplia
• The two experiments on Aplia involved
illustrating
▫ The competitive equilibrium (simple D&S)
▫ The effect of a price control
• These can be debriefed in a manner similar to
that of the international trade experiment
• Aplia records the trade data which can be
downloaded along with the distributions of
buyer values and seller costs post experiment
for distribution to students to use in follow-on
exercises.
What can students learn from these
Experiments?
All: How to predict the equilibrium outcomes in
markets (including price, quantity, surplus) and
the predictive power of the simple demand and
supply model.
The price control experiment: The effect of price
ceilings and floors
The international trade experiment:
 The law of one price and how it is violated when
trade is restricted.
 Free trade is welfare enhancing, but may leave
some market participants worse off.
Other?
The Experiment as Springboard
Students can complete a simple problem set
comparing the theoretical and experimental
outcomes of the experiment.
Students can complete the experiment in
conjunction with readings about related topics
(e.g. price control policy, international trade
and globalization)
Students write an essay discussing the effects
of price controls or trade liberalization.
Other?
Best Practices
Which experiments should I run?
How many experiments?
Manually run or computerized?
How should students be prepared for the
experiment?
Should experiments be run before or after
presentation of the material?
Does everyone have to participate?
How can we motivate students?
I’ve run an experiment, now what?
What role does the instructor play in all this?
Some Sources of Experiments
 Manually run
 Bergstrom & Miller, Experiments with Economic
Principles
 Delemeester & Brauer’s Games Economists Play
 Denise Hazlett, Classroom Experiments in Macro
 Computerized
 Charles Holt, Veconlab
 Aplia
 EconPort
Before We Conclude…
Why should we use experiments?
What have we learned about classroom
experiments?
Do you have unanswered questions?