ECN2101: Microeconomics Market Simulation, 3pm class

vote on December 1, 2014, 3pm

Item	Votes	Percent	Dollars per share
Apple Pie	9	25	75
Chocolate Chip cookies	8	22	42
Cinnamon Rolls	9	25	75
Ice Cream	10	28	128

Computer trading

Click here for results of computer trading on December 1, 2014, 3:30-4:15
Click here for description of computer trading for November 17

Summary of trading on November 10, 2014

AP volume=   405  average price:    33  maximum:   110   minimum:     1
CC volume=   341  average price:    76  maximum:   200   minimum:    30
CR volume=   546  average price:    92  maximum:   200   minimum:    25
IC volume=   298  average price:    68  maximum:   120   minimum:    30

Results of auction on November 5, 2014

Click here for results of initial auction on November 5, 2014 (3pm)

Introduction

The class stock market simulation will involve four companies.

• AP: apple pie
• CC: chocolate chip cookies
• CR: cinnamon rolls
• IC: ice cream

The initial auction will be Wednesday, November 5.

Auction/Trading

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 Monday, November 10. 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.

Wash trades

You do not get credit for trading with someone (or with a group of people) if you make two or more trades that completely cancel out. For example, if you sell 10 shares of ice cream at $50 to person A, and then buy 10 shares of ice cream at $50 from person A, you do not get credit for trading with person A. This kind of trade is called a wash trade because the results "wash out" and have no effect.

Negative balances

Be sure that you do not sell stock that you do not have, and do not spend money that you do not have.
If you do overdraw your account and end up with a final balance for a stock is negative, then your portfolio value is charged $300 per share for each negative share (for example, if a portfolio contains -3 shares of a stock, $900 is subtracted from the portfolio value). If the final balance of cash is negative, then your portfolio is charged $5 for each negative dollar (for example, if a portfolio contains -20 dollars of cash, then $100 is subtracted from the portfolio value). If you finish with a negative total portfolio value your course grade will be lowered by at least one grade.
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