The Value of Exchange: A Classroom Experiment

This page is authored by Tisha Emerson, Baylor University, based on an original activity by James Henderson, Baylor University.
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This material is replicated on a number of sites as part of the SERC Pedagogic Service Project

Summary

This experiment illustrates the value of exchange to students. Students each receive an initial allocation of candy which they are asked to rank in terms of the satisfaction it provides them. They are then allowed to engage in trading with other students. After each round of trading, students are asked to reevaluate the satisfaction they derive from the new set of candy that they have. Through this process, students see that they are made better off from exchange.


Learning Goals

Students learn the value of economic exchange. This is especially useful when trying to motivate a discussion about the gains from trade between countries.

Context for Use

This exercise can be used with any level class and should work with most class sizes. It can be completed within 15-20 minutes, depending on the number of rounds of trading allowed. It is great for the first day of an economics class as an ice breaker (having students meet each other as they trade) as well as an introduction to the value of exchange. It is especially particularly well suited for principles level and international economics courses.

Description and Teaching Materials

Preparation:
The instructor should select several types of individually wrapped candy, for example, "fun size" chocolate bars (e.g. snickers, Hershey's chocolate, Nestle's crunch, etc.), butterscotch, mints, Starburst, small lollipops and bubble gum. Distribute the candies into small paper bags (like brown paper lunch bags) with 5-7 pieces of candy in each. Each bag need not have a different mix of candy, but as a guideline have at least 7 different allocations for a class of 35. The bags and a copy of the attached record sheet should be prepared before class.

In class:
At the start of the experiment, tell the students that you are going to give them each a bag with something in it and that the contents are for them to keep. Distribute the bags.

Once each student has a bag, ask them to open it and look inside, but not to let anyone else see what is contained in their bag. Ask them to think about the contents and to rank, on a scale of 0 to 10, how much satisfaction they derive (collectively) from the items in their bag. This value should be recorded on their record sheet.

Next, ask the students to empty the contents of the bag onto their desk. Have them look around to see what everyone has and to reconsider the set of candies they received in light of this additional information. They should record the value they derive from their candies (which may or may not change from their original value).

Next, tell the students that they will now have the opportunity to trade candy with one student in their half of the classroom. All trades must be voluntary - i.e. both parties must agree to the trade. Aside from these two conditions, there are no other restrictions on trading. For example, they need not trade candies in a one-for-one ratio. Additionally, they need not trade if they can't find a trade that they find acceptable. Once it appears that trading is completed, ask students to consider the set of candies that they now have and to record the value that they derive from it.

Finally, allow students to trade with anyone in the entire classroom. At the end of this round of trading, ask students to record their final bundle of candy and to record this value. It is at this point that allow them to consume their candy if they wish.

Upon collecting the record sheets, report to students the total values (of the class) in each round of valuation and show that the sum has increased. Ask students whether the total amount of candy allocated has changed (e.g. is there more candy available?) and if not why has the satisfaction level of the class risen? This allows us to discuss the value of exchange.

Note: This exercise is very good as an ice breaker. If used in this manner, you can have the students collect information about the classmates that they trade with, e.g. name, hometown, major, etc. The attached record file contains a slot for students to record name and hometown.
Student Record Sheet (Acrobat (PDF) 16kB Sep25 09)



Teaching Notes and Tips

Assessment

Here are some questions for discussion at the conclusion of the experiment:
  • Talk about your trading experiences.
  • Why did some students trade why others did not?
  • Why have the values have increased when there has been no change in the candy available?

References and Resources