Transcript Tuvana Pastine

Classroom
Games
in Economics
Tuvana Pastine
Sept 19, 2014
Guessing Game
Pick a natural number from 1 to 100: 1, 2, 3, … ,100
AND THE WINNER IS:
The number closest to 2/3rd of the average of all guesses.
For instance:
If average of class= 90
winner is number closest to 90*(2/3)=60
If average of class is 18
winner is number closest to 18*(2/3)=12
What is the theoretical prediction?
100→66→44→29→ . . .
• 1997 Financial Times
Winner=15
Do people really behave as the
theory predicts?
• Rationality
• Common Knowledge of Rationality
If not, what good is the theory?
Keynes’ Beauty Contest
“The General Theory of Employment, Interest and Money” (1936)
Price Fluctuations in Equity Markets
Keynes’ Beauty Contest
“It is not a case of
choosing those which,
to the best of one’s
judgment, are really
the prettiest, nor even
those which average
opinion genuinely
thinks the prettiest. . .
Keynes’ Beauty Contest
“. . . We have reached the
third degree where we
devote our intelligences
to anticipating what
average opinion expects
the average opinion to
be. And there are some, I
believe, who practice the
fourth, fifth and higher
degrees.”
Greater Fool Theory
You may be a fool to pay as much as you
did, but you are betting that there’s a
greater fool down the road.
And if you’re right, then of course you
aren’t being foolish.
Terminology:
Rationaliy
Common knowledge of rationality
Keynes’ beauty contest
Fundamental value and stock prices
Greater fool theory
http://www.npr.org/blogs/money/2011/01/14/132906135/
ranking-cute-animals-a-stock-market-experiment
Why Games
True Learning
Academic Evidence for:
• Higher Student and Teacher Satisfaction
• Weak Students versus Strong Students
• Girls versus Boys
http://www.marietta.edu/~delemeeg/games/
Pit Market
40-60 minutes
15-20 students
http://people.virginia.edu/~c
ah2k/pitmkttr.pdf
supply, demand, consumer
surplus, producer surplus,
equilibrium price and
quantity
variations: sales tax, price
ceiling