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Economic Decision Making

Textbook Chapter: Chapter 1

MobLab Game: (Keynesian) Beauty Contest

Key Learning Objectives:

  • Optimal actions often depend on the actions and thinking of others.

Cost Analysis

Textbook Chapter: Chapter 6

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!

Perfect Competition

Textbook Chapter: Chapter 7

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.

Monopoly Pricing

Textbook Chapter: Chapter 8

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.

Oligopoly

Textbook Chapter: Chapter 9

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.

MobLab Game: Cournot

Key Learning Objectives:

  • The underlying logic of the Cournot model: how market price is determined by aggregate output.
  • The equilibrium outcomes of Cournot competition.

Game Theory

Textbook Chapter: Chapters 10

MobLab Game: Matrix: Instructor Specified

Key Learning Objectives:

  • Allows instructor maximal flexibility in specifying payoff matrices in support of desired teaching outcome.

MobLab Game: Bertrand

Key Learning Objectives:

  • Factors facilitating collusion in repeat interactions.

Regulation and Public Goods

Textbook Chapter: Chapter 11

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.

Decision Making under Uncertainty

Textbook Chapter: Chapter 12

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.

The Value of Information

Textbook Chapter: Chapter 13

MobLab Survey: Bayesian Updating

Key Learning Objectives:

  • How to appropriately update beliefs upon receipt of new information.

MobLab Game: Private-Value Sealed-Bid Auction

Key Learning Objectives:

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

MobLab Game: Common-Value Sealed Bid Auction

Key Learning Objectives:

  • Gain bidding experience.
  • Gain first-hand experience with the winner’s curse.

Asymmetric Information

Textbook Chapter: Chapter 14

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.

Bargaining and Negotiation

Textbook Chapter: Chapter 15

MobLab Game: Bargaining: Alternating Offer

Key Learning Objectives:

  • Features of a two-party negotiation may offer an advantage to a particular party. Fairness considerations may lessen any advantage.