Randal C. Picker
Leffmann Professor of Commercial Law
The
Website: picker.uchicago.edu
Email: r-picker@uchicago.edu
Voice: 773.702.0864
Twitter: randypicker
The idea is to try to do some market simulations to enable students to see firsthand the effects of market power. These are intended to be purely educational and the results of the simulations will not count towards your grade.
We will be using
Twitter as a group messaging platform to act as our market simulator. You
should set up an identity with Twitter and can do that easily and for free at
twitter.com. At the end of the week as the class enrollment has settled down, I
will assign students numbers for the simulations.
The initial
simulation will be of a matching market. The offline version of this game is
played with a deck of cards and we will track that structure online. Players
will be assigned a color, black or red, and will seek to make a match with the
opposite color. Black cards match with red cards and vice versa. You can match
only once in a trading period.
Matches are worth
100 points. A successful match is a pairing between the holder of a red card
and the holder of a black card in which they agree on how to divide the 100
points between them. A deal can be done at any division of points ranging from
(100,0) to (0,100).
You will make and
accept offers over Twitter. We will use a highly structured approach to
messaging. This should make it possible to dump the messages down to an Excel
spreadsheet so that we can look at the results of the simulation.
Messages will have
the following message structure:
@rcpclass
Simulation field, ID field, Market field, Offer Number field, Type field, Offer
field, Offer Type field, Deal field
· “rcpclass” is an
identity that I have set up on Twitter for the class simulations. By starting
your tweet—that is what they call a message on Twitter—with @rcpclass you will be sending the tweet to my class identity
and it will not be seen by your other Twitter followers. Tweets are generally
public but this will mean that only individuals looking for tweets to @rcpclass will really see these messages.
· The Simulation field will just be the number
of the simulation that we are doing. It will be three characters of the form
X##.
· The ID field will consist of your student
number, as assigned by me. It will be four characters of the form S###.
· The Market field will be the market that you
have been assigned to for that particular simulation. That will change from
simulation to simulation. You can only do deals with students who are in the
same market that you are in. The market field will be three characters of the
form M##.
· The Offer Number field will track the number
of offers that a particular student has made a in a given simulation. It will
consist of four characters of the form F###. Students will number offers
consecutively in a particular simulation.
· The Type field will consist of three
characters and will be either RED or BLK depending on the type that you have
been assigned.
· The Offer field will be the offer that you
are willing to accept. It will consist of three characters of the form ###. An
offer of 100 means that you are proposing a division of 100/0. The offer field
will be set to 000 if the message is not an offer but is instead an acceptance,
confirmation or cancellation of a prior offer.
· The Offer Type field and Deal fields are closely related. The Offer
type field will consist of four characters and will be one of five messages:
OPEN, S###, ACPT, CFRM or CNCL. You can only have one offer outstanding at a
time. Open indicates that you are making an offer that can be accepted by
anyone holding an opposite color card on the terms that you have offered. S###
indicates that your offer can be accepted by only student S###. For both of
these offer types, the Deal field should be set to NO. If you want to change
offers, you need to cancel your prior outstanding offer first. To do that, set,
the offer type field to CNCL and the deal type field should be set to the offer
number that you are canceling. If you are accepting an offer that has been
made, you should set the offer type field to ACPT. In the deal field, list the
number of the student whose offer you are accepting and the offer number that
is being accepted. In this case, the deal field will have structure, S###:F###.
Finally, once a deal has been struck, both parties to the deal should send a
message where the offer type field is to set CFRM and the deal field is set to
S###:S###:###:###. The first student number is the lower student number in the
matching pair, the second student number the higher number. The third number is
the point allocation to the black card, the second number the point allocation
to the red card.
Consider a few
messages to see what that all means:
@rcpclass
X01, S050, M01, F001, RED, 070, OPEN, NO: Each message will consist of 9
chunks, as this one does. In the first simulation, student 50 holding a red
card, assigned to market 1, makes an initial offer to anyone of 70. That means
that any student in the same market holding a black card can accept that offer
if he or she is willing to accept only 30 points.
@rcpclass
X01, S075, M01, F001, BLK, 060, OPEN, NO: Student 75 holding a black card has
made an open offer of 60.
@rcpclass
X01, S080, M01, F001, RED, 055, S075, NO: Student 80 holding a red card makes
an offer to just S075 suggesting a division of 55/45.
@rcpclass
X01, S075, M01, F002, BLK, 000, CNCL, F001
@rcpclass
X01, S075, M01, F003, BLK, 050, S080, NO
In these two
messages, student 75 first cancelled her outstanding initial offer and then
made a counteroffer to S080 suggesting a 50/50 split.
@rcpclass
X01, S080, M01, F002, RED, 000, CNCL, F001
@rcpclass
X01, S080, M01, F003, RED, 000, ACPT, S075:F003
Student 80 cancelled
her prior outstanding offer and then accepted student 75’s offer of a 50/50
split. That result should then be followed by two other messages:
@rcpclass
X01, S080, M01, F004, RED, 000, CFRM, S075:S080:050:050
@rcpclass
X01, S075, M01, F004, BLK, 000, CFRM, S075:S080:050:050
In the case of an
OPEN offer, if you receive more than one ACPT message, you must accept the
first message received.
We will have a period in which the market is open: 7 to 10
pm on Thursday, Jan 13. The best way to see what the state of the market is is by running a search on Twitter on “@rcpclass”.
You might also want to add to the search the market that you are in to just see
what is going on in your market.
There is no need to
be in the market for the full three-hour window. You can make an offer, exit
for an hour and come back to see what has happened.
We will play the
card game simulation again.