ECN2101: Microeconomics Market Simulation

Click here for summary of economics of the market simulation

vote on November 26, 2012

ItemVotes PercentDollars per share
Apple Pie 11 27 77
Chocolate Chip cookies 11 27 77
Cinnamon Rolls 13 32 132
Ice Cream 6 15 35

Computer trading

Click here for results of computer trading on November 14
Click here for description of computer trading for November 14

Deadline for trading with paper forms: Wednesday, November 7, 8:25pm

Summary of trading on October 8, 2012

AP volume=   648  average price:    40  maximum:    80   minimum:    15
CC volume=   561  average price:   109  maximum:   175   minimum:    20
CR volume=   950  average price:    47  maximum:   100   minimum:    13
IC volume=   821  average price:    30  maximum:    80   minimum:    20

Results of auction on October 3, 2012

Click here for results of initial auction on October 3, 2012

Introduction

The class stock market simulation will involve four companies. The initial auction will be Wednesday, October 3.

Auction/Trading

At the initial auction you will bid for stocks; the bidders who bid the highest prices will receive shares of stock until the supply of each stock is used up.

There are 1,000 shares of each stock; each person starts with $15,000 worth of cash at the initial auction.

After the initial auction you will be able to trade your shares of stock with other members of the class, at whatever price is mutually agreeable. We will have stock trading in class on Monday October 8. There will also be another day of in-class trading to be announced later.

Class vote/Final Values

Following the end of stock trading, the class will take a vote between the four treats. The class will actually receive the treat that receives the most votes. Therefore, you have an incentive to vote your true preference.

The final value of the shares of stock will be determined after the vote:

Final payoff for stocks:

The final standings are ranked by the highest value portfolio. example:

Prizes

Prizes will be awarded based upon how the value of your portfolio ranks with the rest of the class: You need to turn in a one to two page paper (worth 10 points) about your experience in the simulation by the end of the quarter. Turn this paper in by email.

You can earn stock market extra credit points as follows:

Also, everyone gets the treats you vote on.

Hint: in order to succeed at this simulation, it helps to be good at predicting which of the four treats the people in the class will vote for, since that is what determines the final value of the shares of stock.

Think about which stocks you would like to bid on in the initial auction. You can bid on one stock, or on all four, or two or three; however, the rule is that the total dollar value of your bid must be less than or equal to $15,000. If you bid a higher price, you are more likely to receive that stock; but the higher a price you bid, the smaller is the quantity you can bid for.

Once the in-class trading starts, it is always to your advantage to buy a share of stock if you can buy it at a price that you think will be less than the final value of that stock. It is to your advantage to sell a share of stock if you can sell it at a price you think is higher than what the final value of that stock will be.

Wash trades

You do not get credit for trading with someone (or with a group of people) if you make two or more trades that completely cancel out. For example, if you sell 10 shares of ice cream at $50 to person A, and then buy 10 shares of ice cream at $50 from person A, you do not get credit for trading with person A. This kind of trade is called a wash trade because the results "wash out" and have no effect.

Negative balances

Be sure that you do not sell stock that you do not have, and do not spend money that you do not have.
If you do overdraw your account and end up with a final balance for a stock is negative, then your portfolio value is charged $300 per share for each negative share (for example, if a portfolio contains -3 shares of a stock, $900 is subtracted from the portfolio value). If the final balance of cash is negative, then your portfolio is charged $5 for each negative dollar (for example, if a portfolio contains -20 dollars of cash, then $100 is subtracted from the portfolio value). If you finish with a negative total portfolio value your course grade will be lowered by at least one grade.
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