What have you learned about how markets work and how prices are determined by playing the chips game?
We have just completed a simulation with another mimicking a market in different situations: with a monopoly, a maximum price, unequal amounts of buyers and sellers and so on. Thirty students occupy a class, equal amounts spread on two sides of the room, one side buyers and the other sellers. A market day is a round, and on each round, a teacher goes around giving cards that indicates the price of the product for that round. Our market was the computer chip market.
I have learned that a cohort of students, some that are still tyros in the field of economics with basic knowledge mixed with those who have studied it at a basic level for two years behave similarly to a real-life market, to an extent. Even though the first few rounds were realistic due to the drive and excitement among students, the energy in the room soon dissipated as the rounds went on mirroring something less realistic – which is hard to avoid.
What I have learned economics wise is that as price increases demand from consumers for a product decreases but suppliers supply more. The reason for this is because consumers feel that as price increases their utility for the same product decreases and so demand less. However, suppliers, as price increases, feel that the profit they can make on that product will increase and so supply less.
These kind of market simulations are interesting in the sense that this is exactly what social scientists year to achieve; moreover, our economics teachers have a pool of volunteers to readily perform such experiments.