Appendix E — In-Class Experiments (Student Version)

Economics is learned by doing. These experiments can be run in class (with your instructor) or informally with friends. Each takes 15–30 minutes and demonstrates a key concept.

Experiment 1 — The Double Auction (Supply and Demand)

Concept: market equilibrium emerges from decentralized trading.

Setup: Half the class are "buyers" (each with a card showing their maximum willingness to pay). Half are "sellers" (each with a card showing their minimum acceptable price). Buyers and sellers negotiate freely. Trades are recorded on the board.

What you'll see: prices converge toward the competitive equilibrium within 3–5 rounds. No one "sets" the price — it emerges from the trading.

Experiment 2 — The Public Goods Game (Free Riding)

Concept: the free-rider problem.

Setup: Each student receives 10 tokens. They privately choose how many to contribute to a "public pot." The pot is multiplied by 1.5× and divided equally among all students (regardless of contribution).

What you'll see: contributions start moderate and decline over rounds as students learn they can free-ride on others' contributions. The socially optimal outcome (everyone contributes everything) is not individually rational.

Experiment 3 — The Prisoner's Dilemma (Oligopoly)

Concept: individual rationality vs. collective rationality.

Setup: Students are paired. Each privately chooses "cooperate" or "defect." Payoffs: both cooperate → $3 each; both defect → $1 each; one cooperates, one defects → cooperator gets $0, defector gets $5.

What you'll see: most pairs defect (the Nash equilibrium). Both would be better off cooperating, but individual incentives push toward defection.

Experiment 4 — The Ultimatum Game (Fairness and Behavioral Economics)

Concept: people care about fairness, not just maximizing income.

Setup: One student ("proposer") is given $10 and proposes a split with another student ("responder"). The responder can accept (both keep their shares) or reject (both get nothing). Standard theory predicts: propose $9/$1 (the responder should accept any positive amount).

What you'll see: most proposers offer $4–5 (close to 50/50). Offers below $2–3 are frequently rejected — people prefer getting nothing to accepting an "unfair" offer.

Experiment 5 — The Pit Market (Comparative Advantage and Trade)

Concept: gains from trade through specialization.

Setup: Students are assigned to "countries" with different production capabilities (different opportunity costs). They first produce in autarky, then trade with each other.

What you'll see: total output rises when countries specialize and trade — even when one country is "better" at everything (comparative advantage in action).

Experiment 6 — The Anchoring Experiment (Behavioral Economics)

Concept: anchoring bias.

Setup: Half the class sees "Was the population of Chicago greater or less than 200,000 in 2020?" The other half sees "...greater or less than 20,000,000?" Then both groups estimate Chicago's actual population.

What you'll see: the group anchored on 200,000 gives much lower estimates than the group anchored on 20,000,000 — even though both numbers are obviously wrong and the question is the same.

Full instructor versions with detailed setup instructions, debrief guides, and variations are in instructor-guide/in-class-experiments.md.