A two-round in-class trading game on the principle of comparative advantage and the theory of reciprocal demand

• Main Author: HONG, Bei
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Active learning; Classroom experiment; International trade; Comparative advantage; Terms of trade; Higher Education; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2211; https://ink.library.smu.edu.sg/context/soe_research/article/3210/viewcontent/A_two_round_in_class_trading_game_on_the_principle_of_comparative.pdf
• Institution: Singapore Management University

This paper outlines a classroom trading game that explores equilibrium terms of trade using the principle of comparative advantage and theory of reciprocal demand. Students are divided into eight groups. Each group is assigned a country with hypothetical productivity and each country seeks its trading partner based on comparative advantage. Students simulate the trading of goods between countries with the objective of achieving the best possible terms of trade. The game encourages students to reflect on their learning of the principle of comparative advantage, consider improvements in trade terms through negotiation, and summarize the conditions for mutually beneficial terms of trade. The study contributes to the existing literature by extending the discussion beyond comparative advantage to incorporate mutually beneficial terms of trade as well as factors contributing to the distribution of trade gains.