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.
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