Classroom Experiments

  1. Double Marginalization - This experiment illustrates the double marginalization problem and how vertical integration solves it.

        Instructions    Protocol    Discussion Questions    Slides

  1. Right of First Refusal Experiment - This experiment illustrates how the presence of a "meet or release clause" in a contract affects bargaining outcomes.
  2. Lobbying Congress - Based on the McCain-Schumer legislation, this experiment illustrates rent-seeking games as well as how the timing and publicity of rent-seeking expenditures can foreclose opportunities for certain interest groups to compete.
  3. How to Sell a Company - This experiment illustrates how differences in the form of the "auction" for a company affect shareholder returns. Specifically, the difference between selling a company in exchange for cash as opposed to shares is highlighted.
  4. The Value of Education - This experiment illustrates how signaling works. Even though there are two equilibria in the model (pooling and separating), students end up converging to the separating equilibrium. They're typically surprised in retrospect at the possibility of pooling and about the fact that (under these parameters), signaling has left all worse off.
  5. Venture Capital Financing - This experiment illustrates screening contracts. A variation, which will be included in a revision of the experiment, is to let entrepreneurs and banks bid solely in interest rates. This variation illustrates credit rationing.