Economic concepts that can be illustrated by the International Trade Game
The International Trade Game can be used to illustrate the following economic topics:
- Specialisation and division of labour. How did teams divide up the tasks? Was it more efficient to have some students cutting out the shapes, while others queued to sell the shapes, while others negotiated, and others scouted around to see what other teams were doing and whether there were opportunities that could be of benefit.
- Opportunity cost. What was the cost in terms of lost time, value from shapes, lack of access to equipment, etc. of particular decisions?
- Supply and demand and the determination of price. Why did prices vary as they did in the game? What determines the magnitude of commodity price changes in the real world?
- Prices as signals and incentives. How did teams respond to price changes; how elastic was their supply and why? Did anticipated price changes affect the production of shapes or when they were taken to the trader?
- Derived demand and the price of inputs. How did the prices of shapes affect the price of various pieces of equipment or their rental value? Do the same principles apply to pencils (in relatively plentiful supply) and scissors (in relatively short supply)?
- Cartels and oligopolistic collusion. What cartels did form? What cartels could have formed, and how would they have affected the balance of advantage in the game?
- Game theory: strategy, bargaining, trust, etc. What incentives were there for sticking to agreements and for breaking them? How would the number of people in a team or the number of teams involved in an agreement affect the likelihood of sticking to or breaking an agreement? How did risk attitudes determine strategy?
- The law of comparative advantage. Why do countries specialise in particular products? How does this depend on their resources? How does it relate to opportunity cost?
- Terms of trade. What determines the relative price of shapes and how does this relate to resources? Can countries influence the price of shapes?
- World inequality. You could refer to the distribution of resources in the world and ownership patterns. What determines whether inequality is likely to increase or decrease over time?
- The importance of market power in international trade. What is the role of multinationals? How do they control markets? Is there anything that developing countries can do to create countervailing power?
- The importance of resources and technology in determining trade patterns. Certain equipment is best designed to produce certain shapes. You could show how control over this equipment affects the pattern of trade and can influence prices.
- Imperfect information and acting on expected prices. How do price expectations influence production and the timing of sales? On what basis are price expectations formed? Do people learn from experience?
- Risk and uncertainty. There are several aspects of the game which involve uncertainty. These include the likelihood of obtaining equipment, future prices, the outcome of the paper auction, the role of the coloured sticky shapes, the effects of negotiations between other countries on their behaviour, and whether and what punishment will be imposed by the leader for 'malpractice'.
- Bidding and auctions. What determines the price at auctions? What determines whether there will be any collusion between bidders and what would be the outcome of that collusion?
The game may also be used to illustrate a number of more general development issues, such as the powerlessness of poor countries. It gives participants the opportunity to experience various emotions concerned with production and trade in an unequal world: emotions such as envy, greed, frustration and the desire to escape poverty by any means. In so doing, it can help students to gain a greater empathy with development and trading issues. To that extent it encourages students to move away from a typical textbook account of the embedded ideas and prompts them to consider alternative motives that might prompt economic behaviour.