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In this experiment, each participant is assigned
a role as a large or small producer of two products.
The large producer has an absolute
advantage in both products, but each person
has a comparative advantage in one of the products.
In the absence of trade, each person is limited in the number of balanced
combinations of the two goods ("ComBos") that can be produced,
and the (partial) specialization that results from trade increases the
number of ComBos that each is able to consume. The trade quantity is determined by
the minimum of the two participants' trade offers. Coordination of production
specialization is facilitated by allowing producers to communicate in advance.
In large classes, the experiment can be run in asynchronous mode "after hours."
 | | | | | | There is also a Diminishing Productivity Option in which
subjects must decide how to allocate a fixed amount of labor to
two alternative production processes. The impulse
to increase the scale of the process with the higher average
product results in lower total production, and the optimum occurs
where the marginal products are equalized. |
Vecon Lab - September 5, 2008 |