Comparative Advantage Experiment

Haupert, Michael J. "An Experiment in Comparative Advantage." The Journal of Economic Education. 27 (Winter 1996) 37-44.

This experiment demonstrates comparative advantages and opportunity cost. Students have a choice of goods to produce given a fixed allocation of inputs and a production function. They have a consumption goal and an opportunity to trade their output over a number of trials. Each student has the capacity to produce only two goods with one given type of input. The class is divided into four types of producers. Each player is identified as either type A1, A2, B1, or B2. Each type is allocated a number of hours of labor and a productions function telling them how many hours of labor it takes to produce one unit of steel or wheat. These numbers remain constant through all five rounds. Players decide how many units of wheat and steel they will produce given the limited amount of labor hours each has. Players may not produce any fractional units of a good, nor may they use fractional hours of labor. Neither labor or production goods may be carried over from one period to the next. In each round, the rules change. In the first round, students choose their production combination and no trading is allowed; therefore, all goods are consumed. In the second round, students again choose their production combination; however, they may go on the market and trade. In the third and fourth rounds, students may trade, but can consult with other students before production occurs. This way, students can base their production plans on their comparative advantage with other students. The fifth round is a repeat of the fourth. Modifications can be added and allocations and tables are in the article. Discussion follows the experiment.