EconApps 2.0
Pit Market Trading Student Instructions
Logging On
O Click EconApps 2.0
O
O
O
O
app
Hold in portrait mode
Tap token for session
Fill out name and
session password
provided by your
instructor
Enjoy the Economist
quotes while you wait
to start!
Pit Market Description
O You will participate in a series of trading
rounds in a Pit Market.
O A pit market is similar to the trading floor or
pit of the stock market where people are
running around making trades.
O At the beginning of each round you will be
randomly be assigned the role of a buyer or
a seller.
Buyer Role Screens
Buyer Role: Earnings Screen
Trade ticker
Round earnings =
combined widget
value + tokens
remaining
 Time left
 Profits made per
widget
Profit = Value – Price
You start off with a
token
endowment
Your round
earnings
accumulate 
 You buy Widgets
(if you can profit)
Buyer Role: Wallet Screen
Trade ticker
Time left
Token
denominations
You finger-drag a
token from here

You can make
change by tapping
an empty token
This will
decrease
 To there
 This will
increase
(it’s your offer)
Buyer Role: Making Change on Wallet Screen
Tap empty
token
spaces to
make
change
 Before
After 
Buyer Role: Trade Screen
Trade ticker
Time left
A QR Code will
be
automatically
generated
 Your offer here
Press the trade
button first 
Seller Role Screens
Seller Role: Earnings Screen
Trade ticker
Round earnings =
combined widget
value + tokens
collected
 Time left
 Profits made per
widget
Profit = Price - Value
You start off with a
widget
endowment
Your round
earnings
accumulate 
 You sell Widgets
(if you can profit)
Seller Role: Wallet Screen
Trade ticker
Time left
Token
denominations
You finger-drag
a widget from
here 
Widgets left will
decrease
Or use the
buttons 
To the right  off
the screen
 Widgets offered
will increase
Seller Role: Trade Screen
Trade ticker
Time left
Your camera
will activate
 Your offer here
 Scan the
buyers QR code
Press the trade
button first 
What trades should I make?
O As a Seller…
O As a Buyer…
O Trade Price should
O Trade Price should
exceed Widget Value
O Trade Profit = Trade
Price – Widget Value
fall below
Widget Value
O Trade Profit = Widget
Value – Trade Price
Approve or Cancel the Trade
O Once a trade is
initiated it can be
approved or
canceled.
O Check the trade for
accuracy with your
verbal agreement!
O To Approve both have
to hit “Accept.”
O To Cancel only one
has to hit “Reject.”
What happens after the trade?
O As a Seller…
O As a Buyer…
O Less Widget(s)
O More Widget(s)
O More Tokens
O Less Tokens
O Your earnings and
O Your earnings and
wallet screens are
updated
O You can make
another trade (if limit
is not met)
wallet screens are
updated
O You can make
another trade (if limit
is not met)
Market Equilibrium
O There are market demand and market
supply curves representing the widget
values of all of the buyers and sellers, but
you don’t know what they look like.
O There is a market equilibrium price at the
intersection of these curves, but you don’t
know where the curves intersect.
O The market demand and market supply
curves can change in any round because
markets are dynamic!
Rounds 1-4
Rounds 5-8 – Increase in Demand
Are we better off?
O Measure difference between last round earnings and
starting point
O Buyer starts with 50 tokens
O Seller starts with 4 widgets, worth 28 tokens if kept
O Individual Consumer’s Surplus = Buyer’s Profit from a
O
O
O
O
trade
Individual Producer’s Surplus = Seller’s Profit from a
trade
Consumer Surplus = sum of Buyers’ profits for all trades
Producer Surplus = sum of Sellers’ profits for all trade
Total Surplus (Gains from trade) = Consumer Surplus +
Producer Surplus
Gains from trade are maximized
in a free market
Are we better off?
O Let’s total up our earnings for the last round.
O Maximum Gains From Trade = [(7+5+3+1)*B +
(7+5+3+1)*S] = 16*B+16*S
O Actual Gains from Trade = Total Class Earnings - (50*B +
28*S) =
O Market Efficiency = Actual/Max*100% =
Free Markets vs. Communism
O Suppose instead we had Communism: Complete
physical redistribution of tokens and widgets.
O Each Buyer’s earnings = [(18 + 16) + 25] = 59
O Each Seller’s earnings = [(4 + 6) + 25] = 35
O Total Class earnings = 59*B+35*S =
O Compare with total class earnings for the last round.
O Max Possible Class Earnings = Endowments +
Maximum Gains From Trade = (50*B + 28*S) +
[(7+5+3+1)*B + (7+5+3+1)*S] = 66*B+44*S
O Actual losses from communism =
O Why do command economies fail?
O Knowledge and incentive problems
Price Controls
O You will have the opportunity
to see your widget values
and role as buyer or seller
prior to your voting on a price
control.
O Buyers will vote for a price
ceiling
O price <=ceiling
O Sellers will vote for a price
floor
O price >=floor
Price Controls
O Random Dictator Rounds
O At the beginning of each round you
will be told whether you are a buyer
or seller, your Widget valuations,
and asked to vote on your most
preferred price control.
O A vote will be randomly selected
(using a random # generator) to
dictate the price control.
O Once a price control is set illegal
trades will receive a message like
this 
Takeaway Lessons
O Free Market Exchange creates more Surplus
than Communism.
O Free Market Exchange creates more Surplus
than market exchange under price controls.
O The Invisible Hand
O Free Markets align Self-interest with the
Social-interest
O Price discovery and market equilibrium is an
emergent order, little information is required