Trading Game

Introduction:

In this game students will trade with each other and improve their knowledge of
economics and improve their lives!

Learning Objectives:

1. Identify the gains from voluntary trade.

2. Recognize that the gains from trade increase with the size of the trade network
(market).

The 3 Versions of the game

The core of the game is that students will trade items with each other in order to simulate
a real life example of gains from trade.

How you get to the items is up to you (judge which version will work best for your
classroom).

Version 1
The day before the activity, give the students a paper clip and ask them to trade the
paperclip at home for an item before the following day and bring the new item to class.
This version will work best if you trust your students to trade before the following day. It
has the advantage that you can tie it into the story of the guy who traded from a red paper
clip to a house. Red Paper Clip trades (Wikipedia)/ Red Paper Clip TED talk (starting at
7:30).

Version 2
You can provide items to the students. The advantage of this version is that that you can
be sure everyone will have an item, but the downside is that you have to come up with the
items. Alternatively, you could provide different types of candy to each student.

Version 3
You ask students to bring an item they wouldn’t mind trading away to class. The
advantage of this version is that the students bring interesting items, but like version 1,
you have to hope that the students will do the assignment.
 Alternatively, you could employ version 1 or 3 of the game but have some items in the
classroom just in case students forgot to do the assignment.

THE GAME

For Version 1 have the students answer the following pre-questions-

1. What did you trade the paper clip for?

2. How much did you value the paper clip (in dollars or cents)?

3. How much do you value what you traded it for (in dollars or cents)?

4. Are you better off as a result of the trade?

5. Do you think the person you traded with is better off? Why or why not?

Now move on to the next round (start here for versions 2 and 3)–

Round 1: Try to trade your item for another item one of your classmates brought,
staying within your designated classroom region (limit the classroom regions to 5
students in each region).

Have students answer the following questions–

1. If you traded your item, what did you trade it for? If you did not find a
trade, why do you think you couldn’t trade?

Round 2: Try to trade your item for an item one of your classmates brought. This
time you may trade with anyone in the class.

Have students answer the following questions–

 2. If you traded your item, what did you trade it for? If you did not find a
trade, why do you think you couldn’t trade?

3. Was it easier to find a trade in round 1 or round 2? Why?

4. If you traded, answer this question. If not, go to question 5. How much do

you value (in dollars or cents) your final item? How much did you value
your original item (in dollars of cents)?

5. If you answered 4, skip this question. If you tried to trade, but the other
person refused, how valuable was the other person’s item to you?

6. If you made a trade, are you better off? If you didn’t make a trade, would
you have been better off if you had successfully traded for the item you
were interested in? Why or why not?

7. Do you think that the person(s) you traded with is better off? Why or why
not?

Debrief–

Learning Objective 1: Mutually beneficial exchange.

Trade allows for mutually beneficial exchange where both parties gain from
trade. This happens because people have “preference differences.” You may
value a Snickers Candy bar at a low amount because you are allergic to peanuts,
and therefore trade it for a Hershey’s Candy Bar. Conversely, I may value a
Snickers bar highly because I like nuts in my candy bars. Trade allows for people
to come together and make mutually beneficial exchanges (that leave both of
them better off.

Have the students raise their hands if they are better off. Almost everyone
should be better off.

Have the students raise their hands if they are worse off. No one should raise
their hands. If someone does, ask the person why they made a trade that made
them worse off.

This leads into the next point–

A crucial aspect of trade is that it is voluntary. All the trades that happened in the
classroom must have made the traders better off. Why? Because if they didn’t,
why would the person make the trade?

In the real world, we see these trades all the time. Coffee shops specialize in
producing coffee, they can produce a lot of it at a low cost. Consumers who love
coffee are willing to pay for a morning coffee. The consumer values the coffee
more than the price and benefits from buying it. The coffee shop sells the cup of
coffee at a price higher than their cost of producing the coffee, and therefore
benefits from selling the coffee.

Ask your students

8. Define “preference differences”. How did preference differences allow the

trade to occur?

Learning objective 2: Size of the Market

The larger the market, the higher the chance that these mutually beneficial
trades occur. Throughout history we’ve seen countries grow richer as the size of
their trading market increased. Look at ancient Rome or China since 1980.

The students should have seen that it was much easier to trade in round 2 than
round 1.

Ask your students

 9. What happened when you could trade with more people in round 2? How
do you think your observations translate to international trade generally?

STUDENT ACTIVITY SHEET - TRADING GAME

PART 1 - Paper Clip

1. What did you trade the paper clip for?

2. How much did you value the paper clip (in dollars or cents)?

3. How much do you value what you traded it for (in dollars or cents)?

4. Are you better off as a result of the trade?

5. Do you think the person you traded with is better off? Why or why not?

PART 2 - ROUND 1

1. If you traded your item, what did you trade it for? If you did not find a
trade, why do you think you couldn’t trade?

PART 3 - ROUND 2

2. If you traded your item, what did you trade it for? If you did not find a
trade, why do you think you couldn’t trade?
3. Was it easier to trade in round 1 or round 2? Why?

4. If you traded, answer this question. If not, go to question 5. How much do

you value (in dollars or cents) your final item? How much did you value
your original item (in dollars of cents)?

5. If you answered 4, skip this question. If you tried to trade, but the other
person refused, how valuable was the other person’s item to you?

6. If you made a trade, are you better off? If you didn’t make a trade, would
you have been better off if you had successfully traded for the item you
were interested in? Why or why not?

7. Do you think that the person(s) you traded with is better off? Why or why
not?
8. Define “preference differences”. How did preference differences allow the
trade to occur?

9. What happened when you could trade with more people in round 2? How
do you think your observations translate to international trade generally?