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Asymmetric Information, Bargaining, and Comparative Advantage in Trade Relationships: An Interactive Game

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  • Eric P. Chiang

    () (Department of Economics, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431, USA)

Abstract

The concept of comparative advantage is a fundamental tool in economics. Yet, it is a concept that new students of economics frequently find challenging to grasp. In this interactive classroom game, I highlight the three essential lessons of comparative advantage: (i) individuals can have a comparative advantage (and thus benefit from specialization) in an activity despite not having an absolute advantage, (ii) the gains from specialization are greatest when individuals have the most heterogeneous skill sets, and (iii) the extent of each individual's share of the gains from specialization is often left to negotiation, with asymmetric information playing an influential role. This classroom game allows each player to possess a unique production function, thus better resembling the diverse pool of potential trade partners that characterizes real life.

Suggested Citation

  • Eric P. Chiang, 2007. "Asymmetric Information, Bargaining, and Comparative Advantage in Trade Relationships: An Interactive Game," Southern Economic Journal, Southern Economic Association, vol. 74(2), pages 601-608, October.
  • Handle: RePEc:sej:ancoec:v:74:2:y:2007:p:601-608
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    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • F10 - International Economics - - Trade - - - General

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