Preparing for the Equilibrium Price and Quantity Experiment

Suppose that you are a buyer. Your buyer value is $30 and you buy a book for $40. What is your gain or loss?

$10 loss

Suppose that you are a seller. Your seller cost is $8. You submit an ask and someone buys your book for $20. What is your gain or loss?

$12 gain

If you are a seller, what is the maximum number of books that you will be able to sell in one round of trading?

1

True or False: If you are a seller and you are not able to sell a book in a round of trading, you can carry it over and have an extra one to sell in the next round.

False:
Because: If a round ends and you have not traded, your chance to capture a gain from that round goes away. Everything starts fresh in the next round.

True or False: The student with this role should never submit an asking price of less than $10.50.

True
Because: This statement is true. This student is a seller with a seller cost of $10.50. A seller should never submit an asking price that is less than his or her seller cost. If the seller sold at a price below cost, he or she would suffer a loss.

According to this figure, what asking price has this seller submitted?

$15.00

Suppose that you are a seller. Your seller cost is $9. You've submitted an asking price of $15 but have not been able to sell your book. The highest bid being offered by the remaining buyers is $10. The round is about to end. There is only enough time left for you to withdraw your current asking price and submit one last asking price. Which is your best choice?

Withdraw your current ask and submit an asking price of $10.

Suppose that you are a buyer in the first experiment variation. You have a buyer value of $5 in each trading round of this variation. All trades taking place are at prices above $10. You have not bought a book in any of the rounds. Time is about to run out in what you are told is the last round of this variation. What should you conclude?

The experiment is like real life--sometimes you are unlucky and can't make a gain no matter how hard you try. New buyer values and seller costs are assigned only in a new variation, not in the various rounds that take place within a given variation.