JIM MURPHY
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A simple program to conduct
a hand-run double auction
in the classroom

James J. Murphy
Dept of Economics
University of Alaska Anchorage
murphy AT uaa.alaska.edu
<replace 'AT' with @>

Journal of Economic Education, Online Section.
Spring 2004
Vol. 35, Number 2, page 212
Click here to download paper


Outline


Overview

The hand-run double auction is one of the most popular classroom experiments. It's fun for students and easy to conduct. The double auction can be used in a variety of settings to illustrate a number of economic concepts. You do not need access to a computer lab to run a double auction. In fact, the hand-run environment is typically more enjoyable for the students. This web page contains all the material you need to conduct an hand-run double auction in the classroom. What is unique about the material on this page is that, in addition to the usual instructions and parameters, you can also download:

  • a simple program called HandDA that displays and tracks bids, asks and trades,
  • an Excel spreadsheet that will easily plot the supply and demand step functions, plus results from class.

Each of the items above will work independently of the others, so you could download whichever parts are useful to you and ignore the others. You are welcome to download the material here for free as long as it is for non-commercial use.


Materials for a hand-run double-auction

A simple hand-run double auction program

The HandDA program simply replaces the blackboard as a means of displaying trades and storing the data. It will work with any set of experiment parameters you wish to use (number of buyers and sellers, supply and demand schedules, etc.). The program is very intuitive -- just start typing in the trades as they occur. Just in case, I also put together some instructions you can download. When connected to a laptop projector, the program will project this information onto an overhead screen. The HandDA program automatically saves all data in a simple text file from which you can plot the results (the results files are described in the instructions). The program has an optional feature that will also track individual earnings.

The primary advantages of using this program, instead of a chalkboard, are that (1) the data are automatically stored in a text file for later use, (2) bids, asks and trades are neatly displayed overhead with a laptop projector, (3) results can quickly be plotted and displayed. The program is very easy to use. I have successfully run this program with the following operating systems: Windows 95, 98 and XP Professional. I expect that the program would work on other versions of the Windows operating system released after Windows 95.

  • HandDA version 6 (filename: handda.zip, filesize: 3.3MB. Updated March 4, 2003)
    • Click here for detailed instructions (handda_install.pdf, 220KB) on downloading and installing the program. Below is a summary of the instructions:
      • Download the file handda.zip to a temporary folder.
      • Open handda.zip. (You will need WinZip which is available for free).
      • Using Winzip, extract to a temporary folder.
      • Run setup.exe
      • Delete the temporary folder.
    • NOTE: If you downloaded and installed an earlier version (before March 4, 2003), you do not need to reinstall the entire program. Click here to download the updated application (handda.exe). Simply replace your old application file with this one.
  • HandDA instructions (handda_instructions.pdf, 461KB)

An Excel spreadsheet to plot step functions and class results

Excel does not plot step functions very well, unless you "trick" it. I put together a spreadsheet that creates a graph with supply and demand expressed as step functions. It can also display the results from up to three trading sessions. There is a macro that creates the chart, so if you open the file and get a warning about a macro, click on "enable macros."

Immediately after trading is complete, you can quickly display the results to students. Open the HandDA results file in Excel, copy the trades to this spreadsheet, and click the green button in the spreadsheet to run the macro that creates the graphs. The process of displaying results to students should take less than a minute, and gives students some instant feedback.

This spreadsheet will plot any set of supply and demand steps, so you might find it useful even if you choose not to use the HandDA program.

Click here to download the spreadsheet (stepfunctions.xls, 119KB). The spreadsheet includes a macro to create the graphs, so if you get any warnings be sure to enable macros.

Experiment parameters and instructions

The HandDA program above will work with any set of parameters, but I thought it might be helpful to post the handouts I use for my class. Some of this material is adapted from other sources.

For detailed instructions on running a double auction in class, see Davis and Holt (1993). Marcelo Clerici-Arias at Stanford also has a handy check list for instructors. The references have some papers with ideas for some fun variations, including taxes and pollution permit markets.


Below are some online resources and useful references. Please let me know if you have suggestions on additional resources that should be added to the list.

Online resources

Charlie Holt's Web Site is an excellent resource for all sorts of classroom experiments. If you want to run web-based experiments, he has about 30 games you can play including a double auction. This site is definitely worth checking out.

Marcelo Clerici-Arias at Stanford has a site with material you can download to conduct a hand-run double auction. This includes instructions for the instructor, plus all the student handouts. The material is similar to what is on this site, but does not provide the spreadsheets for plotting data or the program to display and record trades.


References

Anderson, L.R., Stafford, S.L. (2000). "Choosing Winners and Losers in a Classroom Permit Trading Game." Southern Economic Journal, 67(1):212-19.
"This paper presents a classroom game in which students trade pollution permits. By changing the distribution of permits across firms, the game shows students how the allocation of property rights determines the winners and losers in the permit trading system but does not affect the efficiency of the system. This game can be used in a variety of classes, including principles or environmental economics, and can be conducted in a 50-minute class period with follow-up discussion in the next class."

Bergstrom, T.C., and Miller, J.H. (1997). Experiments with Economic Principles. New York: McGraw-Hill.
This book contains a number of good classroom experiments, including a double auction.

Davis, D. and Holt, C. (1993). Experimental Economics. Princeton, NJ: Princton University Press.
Appendix A1 has a handy set of instructions for administering a double auction.

Holt, C.A. (1996). "Classroom Games: Trading in a Pit Market." The Journal of Economic Perspectives, 10(1):193-203. Available on JStor.
In a pit market, trades occur simultaneously. Buyers and sellers negotiate in a "trading pit" and when they agree on a price, they report the trade to the instructor.

Kilkenny, M. (2000). "A Classroom Experiment about Tradable Permits." Review of Agricultural Economics, 22(2):586-606.
This is a fun experiment in which students trade pollution permits. It reinforces the concept of an externality, as well as economic instruments for internalizing the external costs. The paper uses a creative way to illustrate the externality--pollution victims must place a paper bag over their heads.

Netusil, N.R. (2000). "Variations on a Theme: The Double-Oral Auction Market and Voluntary Contribution Mechanism Experiments." Review of Agricultural Economics, 22(1):267-284.
"The double-oral auction and voluntary contribution mechanism experiments are the two most commonly used classroom experiments. In addition to running these experiments to illustrate market equilibrium and free riding, variations can be introduced to demonstrate more complex points. Several extensions to these experiments have been reported in the literature. In addition to compiling existing extensions, new extensions are presented and discussed with results from classroom trials at Reed College."

Smith, V.L. (1962a). "An Experimental Study of Competitive Market Behavior." The Journal of Political Economy, 70(2):111-137. Available on JStor.
This is one of the first papers to run a double auction in the laboratory.

Smith, V.L. (1962b). "An Experimental Study of Competitive Market Behavior (in Errata)." The Journal of Political Economy, 70(3):322-323. Available on JStor.
Fixes an error in one of the tables.

Last updated: March 4, 2003

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