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For want of a chair: Teaching price formation using a cap and trade game

Author

Listed:
  • Stefano Carattini
  • Eli P. Fenichel
  • Alexander Gordan
  • Patrick Gourley

Abstract

“Cap and trade” is one of the most innovative policy options developed by environmental economists. By placing a cap on a social bad and allowing firms to buy and sell the right to generate it, policymakers combine government intervention with market-based incentives to improve welfare and internalize the externality. Such programs represent a great opportunity for instructors to show students how economic theory is used in the real world. Students can learn several important tenets of economics by playing an in-class game based on musical chairs, which creates a market for pollution using a mobile app or paper-based interaction. This active learning method engages students and improves comprehension of price formation, gains from trade, voluntary response to incentives, and an important environmental policy.

Suggested Citation

  • Stefano Carattini & Eli P. Fenichel & Alexander Gordan & Patrick Gourley, 2020. "For want of a chair: Teaching price formation using a cap and trade game," The Journal of Economic Education, Taylor & Francis Journals, vol. 51(1), pages 52-66, January.
    • Handle: RePEc:taf:jeduce:v:51:y:2020:i:1:p:52-66
    DOI: 10.1080/00220485.2019.1687379
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    Cited by:

    1. Nungsari, Melati & Flanders, Sam, 2020. "Using classroom games to teach core concepts in market design, matching theory, and platform theory," International Review of Economics Education, Elsevier, vol. 35(C).
    2. Gourley, Patrick, 2024. "Environmental economics in the wild: Using long-form journalism and other mass media in the classroom," International Review of Economics Education, Elsevier, vol. 47(C).

    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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