Feb 26, 2009

From the Classroom vol 8

It is that time of the semester.

This cartel game from the Foundation for Teaching Economics is my favorite part of my micro unit.

By this time, the class has discussed how firms in an oligopoly have an incentive to collude, if allowed. This game demonstrates that, but also demonstrates the incentive for those firms to break that agreement. And that is where the fun begins. The students collude to drive up prices, but then recognize that if all the other groups follow the agreement and they do not, their profits will increase. A great way top off this activity is certainly to discuss OPEC and their quotas.

I feel confident in saying that if you give this activity a shot, it will become a favorite of both you and your students (once they get over being enraged by the deal-breaking.) So sit back, watch the backstabbing happen. The best part—the consumers benefit from every agreement that gets broken.