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Demand, Supply and Equilibrium

Textbook Chapter: Chapter 4 (Microeconomics & Macroeconomics)

MobLab Game: Competitive Market

Key Learning Objectives:

  • The “invisible hand” of the market: how individual profit maximization leads to competitive market equilibrium.
  • Price discovery: the equilibrium market-clearing price results from the valuations of different buyers and costs of different sellers.
  • Gains from trade (i.e., consumer and producer surplus).
  • Shifts in either supply or demand change equilibrium outcomes.

Sellers and Incentives

Textbook Chapter: Chapter 6 (Microeconomics)

MobLab Game: Production, Entry & Exit

Key Learning Objectives:

  • Short-run profit maximization involves thinking at the margin.
  • In the long-run equilibrium of a competitive market with identical firms, all firms earn zero economic profits.

MobLab Survey: Mental Accounting: Sunk Costs

Key Learning Objectives:

  • Surplus maximization requires ignoring sunk costs.
  • Easier said than done!

Trade

Textbook Chapter: Chapter 8 (Microeconomics)

MobLab Game: Comparative Advantage

Key Learning Objectives:

  • The distinction between absolute and comparative advantage.
  • Experience first hand the gains from specialization and trade.
  • Differences in opportunity costs lead to mutually beneficial trade.

Externalities

Textbook Chapter: Chapter 9 (Microeconomics)

MobLab Game: Externalities w/Policy Interventions

Key Learning Objectives:

  • With externalities, the equilibrium of a competitive market without interventions is inefficient.
  • By reducing transactions, a tax can increase efficiency (total surplus) in a market with a negative externality, whereas a subsidy can increase surplus in a market with a positive externality.

Public Goods

Textbook Chapter: Chapter 9 (Microeconomics)

MobLab Game: Public Good: Discrete (Threshold)

Key Learning Objectives:

  • Highlights the features of public goods: non-rival and non-excludable.
  • Demonstrates the distinction between private and social benefits of public goods.
  • Shows how individual profit maximization leads to the free-rider problem.

Common Pool Resources

Textbook Chapter: Chapter 9 (Microeconomics)

MobLab Game: Commons: Fishery

Key Learning Objectives:

  • Individual profit maximization leads to overuse of a common-pool resource.
  • Communication and repeat-play may lead to better outcomes than predicted on standard theory.

Government Interventions in Competitive Markets

Textbook Chapter: Chapter 10 (Microeconomics)

MobLab Game: Competitive Market

Key Learning Objectives:

  • Government interventions (per-unit taxes, subsidies, price ceilings and floors) alter equilibrium outcomes.
  • Equilibrium outcomes do not depend on whether buyers or sellers pay the tax.
  • The difference between tax incidence and who pays the tax.
  • Relative elasticities determine incidence of a tax or subsidy.
  • Excess supply (price floors) and excess demand (price ceilings).
  • The efficiency implications of government interventions.

Monopoly Pricing

Textbook Chapter: Chapter 12 (Microeconomics)

MobLab Game: Cournot (with Group Size=1)

Key Learning Objectives:

  • Monopolies restrict output in order to increase price.
  • The tension between the quantity price effects of increased output.

Game Theory

Textbook Chapter: Chapter 13 (Microeconomics)

MobLab Game: Prisoner’s Dilemma

Key Learning Objectives:

  • Key features of games: payoff matrices, best responses and dominant strategies.
  • Identification of the Nash equilibrium.
  • The (sometimes) conflicting incentives of cooperation and self-interest.
  • Repeated play may lead to more cooperative outcomes.

Oligopoly

Textbook Chapter: Chapter 14 (Microeconomics)

MobLab Game: Bertrand Competition

Key Learning Objectives:

  • When selling an undifferentiated product without capacity constraints, firms have strong short-run incentives to engage in vigorous price competition.
  • Marginal-cost pricing may arise in markets with as few as two firms.
  • Repeat interaction may lead to collusive behavior.

Tradeoffs Involving Risk and Time

Textbook Chapter: Chapter 15 (Microeconomics)

MobLab Game: Risk Preferences: Bomb-Risk Game

Key Learning Objectives:

  • Helps the player understand expected value and thinking on the margin.
  • Helps a player understand her own preferences towards risk, and how risk attitudes vary across a population.

Asymmetric Information (Adverse Selection)

Textbook Chapter: Chapter 16 (Microeconomics)

MobLab Game: Market for Lemons

Key Learning Objectives:

  • Experience in a market with asymmetric information.
  • Asymmetric information may lead to adverse selection and market failure.

Auctions

Textbook Chapter: Chapter 17 (Microeconomics)

MobLab Game: Private Value Sealed Bid Auction

Key Learning Objectives:

  • Gain bidding experience.
  • Shows the equivalence between the first and second-price auctions.

Bargaining

Textbook Chapter: Chapters 17 & 18 (Microeconomics)

MobLab Game: Ultimatum Game

Key Learning Objectives:

  • Demonstrates how social norms such as fairness and altruism may result in behaviors that deviate from game theoretic predictions.

Trust and Fairness

Textbook Chapter: Chapter 18 (Microeconomics)

MobLab Game: Trust Game

Key Learning Objectives:

  • Highlights potential gains from trade arising from trust and trustworthiness.
  • Allow players to explore issues concerning fairness and reciprocity.

Unemployment

Textbook Chapter: Chapter 9 (Macroeconomics)

MobLab Game: Simple Labor Market

Key Teaching Points:

  • Employment levels are determined by both the supply and demand of labor.
  • Policies such as a minimum wage or unemployment insurance affect structural unemployment.

Credit Markets

Textbook Chapter: Chapter 10 (Macroeconomics)

MobLab Game: Bank Run

Key Learning Objectives:

  • Highlights the underlying concept of fractional banking.
  • Demonstrates the trade-off between profit and risk, and shows how bank runs may arise.
  • Policy interventions, such as deposit insurance, can reduce the possibility of bank runs.

International Trade

Textbook Chapter: Chapter 14 (Macroeconomics)

MobLab Game: Comparative Advantage

Key Learning Objectives:

  • The distinction between absolute and comparative advantage.
  • Experience first hand the gains from specialization and trade.
  • Differences in opportunity costs lead to mutually beneficial trade.
  1. Microeconomics and Macroeconomics, both 1st editions.