Author: Lori Alden
Audience: High school and college economics students
Time required: About 50 minutes
Summary: This game demonstrates the advantages of price allocation over other methods. Students are told that a hurricane has caused a major power outage. This increases the demand for ice, since homeowners want to use it to preserve food. It also decreases the supply of ice, since many local ice producers won't be able to make ice without power. This combination of an increase in demand and decrease in supply causes the equilibrium price of ice to go up. In the first round of the game, however, the price of ice is frozen at the pre-hurricane level and allocated on a first-come, first-served basis. In the second round, the ice is allocated by price, with no waiting.
Recommended reading: Is a $10 Bag of Ice Illegal? When it's price gouging, and when it's just really expensive. By Brendan I. Koerner Aug. 18, 2004
Between 15 and 38 students.
50 minutes of class time
Fourteen pieces of candy (to represent the ice)
38 identity cards, 38 wait cards, and a transparency of the Figure 1 graph. Click hereto download the cards and graph in pdf format. Before the game begins, the identity cards should be put in numerical order with #1 on top. Count out as many identity cards as there are students in the class, and put any extras away. Shuffle the cards very well, then verify that at least some of the cards near the top of the stack (which will go to the students near the front of the line) show only small benefits from the ice. If not, shuffle again or plant two or three cards showing small benefits near the top. Put the wait cards in order of the length of the wait, with the shortest times on top. Count out as many cards as you have students in the class, and put any extras away.