This program sets up a multiperson game in which each
person chooses whether or not to enter a market or other activity in which the earnings
for each entrant depend on the number of others that enter.
The payoff for not entering is constant and independent of
other's decisions.
If the number of participants is
large, the equilibrium will be characterized by equal expected payoffs for
entry and nonentry, which results in overentry.
The resulting congestion can be controlled by imposing an entry fee that forces entrants to pay the external costs imposed on others. The
entry fee or toll is set by the experimenter. Alternatively, you can stop play and let
the class vote on a fee for the next round
(with fee revenues to be divided equally).
Students are surprised by
the observation that a tax can be beneficial in this context.
      Key Concepts: Externalities Congestion Tolls Efficiency

Copyright 2009, Charles Holt, Please report problems and suggestions:
veconlab@gmail.com
Vecon Lab  June 25, 2019 