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Equilibrium and Efficiency
MobLab Game: Competitive Market
Key Teaching Points:
- Experience the “invisible hand” of the market; individual profit maximization leads to competitive-market equilibrium.
- Show that the competitive-market equilibrium maximizes total surplus.
Long Run Equilibrium
MobLab Game: Production, Entry & Exit
Key Teaching Points:
- Short-run profit maximization involves thinking at the margin.
- Show how firm entry and exit decisions are affected by the decisions in the previous round, and if the market entrants earned a profit or not.
- In the long-run equilibrium of a competitive market with identical firms, all firms earn zero economic profits.
Monopoly
MobLab Game: Monopoly
Key Teaching Points:
- Profit maximization involves thinking on the margin.
- In the absence of price discrimination, the uniform price case will lead to a sub-optimal price for both markets. Third degree price discrimination can lead to improved welfare across both markets.
MobLab Game: Double Marginalization
Key Teaching Points:
- Review concepts of marginal revenue and monopoly pricing.
- Show how, in the absence of communication or contract to help coordinate decisions, the successive exercise of market power leads to higher market prices and a loss in economic efficiency.
- Explore vertical integration and franchising as solutions to the double marginalization problem.
Oligopoly
MobLab Game: Cournot
Key Teaching Points:
- Understand how increasing the number of competitors in the market, from one to many, shifts the market from the monopoly outcome towards perfectly competitive outcome– meaning higher aggregate quantities, lower prices, and greater total welfare, concentrated among consumers.
- Experience the profit maximization in a situation with strategic interdependence.
MobLab Game: Bertrand
Key Teaching Points:
- 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.
- Capacity constraints and price matching are market features that soften price competition.
MobLab Game: Stackelberg
Key Teaching Points:
- Gain an understanding of the underlying logic of the Stackelberg model: how market price is determined by the aggregation of sequentially chosen output.
- Experience firsthand the paradox of commitment.
- Contrast the strategic and outcome differences of the Cournot and Stackelberg environments.
Bargaining and Fairness
MobLab Game: Ultimatum Game
Key Teaching Points:
- Demonstrates how social norms such as fairness and altruism may factor in the decision-making process for economic actors.
MobLab Game: Bargaining: Alternating Offer
Key Teaching Points:
- Players learn about tradeoffs and fairness in negotiations.
- Promotes learning about backward induction and subgame perfect equilibria in sequential games.
Trust and Reciprocity
MobLab Game: Trust Game
Key Teaching Points:
- Explore and test backward induction and subgame perfect Nash Equilibrium.
- Preferences for trustworthiness (positive reciprocity) or fairness may lead a Responder to return positive amounts. Anticipating this, and perhaps also motivated by altruism or fairness, Investors may choose to invest.
Team Incentives
MobLab Game: Public Good: Punishment and Reward
Key Teaching Points:
- When group output depends on individual efforts, but benefits are shared in common, individuals have an incentive to free ride.
- Individuals in a group can incur a cost to punish or reward other group members.
- Show how incurring these costs results in preserving norms for cooperation.
Asymmetric Information
MobLab Game: Market for Lemons
Key Teaching Points:
- Experience a market with asymmetric information.
- Asymmetric information may lead to adverse selection and market failure.
Long Run Equilibrium
MobLab Game: Production, Entry & Exit
Key Teaching Points:
- Short-run profit maximization involves thinking at the margin.
- Show how firm entry and exit decisions are affected by the decisions in the previous round, and if the market entrants earned a profit or not.
- In the long-run equilibrium of a competitive market with identical firms, all firms earn zero economic profits.