ECN2101: Microeconomics Market Simulation, Winter 2017

#### vote on November 27, 2017

 Item Votes Percent Dollars per share Apple Pie 7 22 82 Chocolate Chip cookies 6 19 49 Cinnamon Rolls 13 41 141 Ice Cream 6 19 49

#### Summary of trading on November 1, 2017

```AP volume=   352  average price:    20  maximum:    45   minimum:     1
CC volume=   486  average price:    75  maximum:  1000   minimum:     1
CR volume=   185  average price:    38  maximum:   100   minimum:    20
IC volume=   710  average price:    49  maximum:   120   minimum:    10
```

#### Introduction

The class stock market simulation will involve four companies.
• AP: apple pie
• CR: cinnamon rolls
• IC: ice cream
The initial auction will be Wednesday, October 25.

At the initial auction you will bid for stocks; the bidders who bid the highest prices will receive shares of stock until the supply of each stock is used up.

There are 950 shares of each stock; each person starts with \$15,000 worth of cash at the initial auction.

After the initial auction you will be able to trade your shares of stock with other members of the class, at whatever price is mutually agreeable. We will have stock trading in class on Wednesday, November 1. There will also be another day of in-class trading to be announced later.

#### Class vote/Final Values

Following the end of stock trading, the class will take a vote between the four treats. The class will actually receive the treat that receives the most votes. Therefore, you have an incentive to vote your true preference.

The final value of the shares of stock will be determined after the vote:

Final payoff for stocks:

• 1st place: pays \$100 plus percent of vote per share
• 2nd place: pays \$60 plus percent of vote per share
• 3rd place: pays \$40 plus percent of vote per share
• 4th place: pays \$20 plus percent of vote per share
The final standings are ranked by the highest value portfolio. example:
• suppose stock A is 1st with 30% of vote; it will be worth \$130
• suppose stock B is 3rd with 25% of vote; it will be worth \$65
• suppose you have \$12,000 cash, 30 shares A, 10 shares B
• total value: 12,000+30*130+10*65=
• total value: 12,000+3,900+650 =16,550

#### Prizes

Prizes will be awarded based upon how the value of your portfolio ranks with the rest of the class:
• 1st prize: win choice of 3 SPU items
• top 5 people win \$5
You need to turn in a one to two page paper (worth 10 points) about your experience in the simulation by the end of the quarter. Turn this paper in by email.

You can earn stock market extra credit points as follows:

• 8 points for finishing in the top quarter of the class
• 6 points for finishing in the top half (but not the top quarter)
• 8 points for trading with at least 24 other people
• 7 points for trading with 23 other people
• 6 points for trading with 22 other people
• 5 points for trading with 21 other people
• 4 points for trading with 20 other people
• 3 points for trading with 19 other people
• 2 points for trading with 18 other people
• 1 point for trading with 17 other people
Also, everyone gets the treats you vote on.

Hint: in order to succeed at this simulation, it helps to be good at predicting which of the four treats the people in the class will vote for, since that is what determines the final value of the shares of stock.

Think about which stocks you would like to bid on in the initial auction. You can bid on one stock, or on all four, or two or three; however, the rule is that the total dollar value of your bid must be less than or equal to \$15,000. If you bid a higher price, you are more likely to receive that stock; but the higher a price you bid, the smaller is the quantity you can bid for.

Once the in-class trading starts, it is always to your advantage to buy a share of stock if you can buy it at a price that you think will be less than the final value of that stock. It is to your advantage to sell a share of stock if you can sell it at a price you think is higher than what the final value of that stock will be.