Simulating Price-Taking

Abstract

In this article, the author presents a price-takers’ market simulation geared toward principles-level students. This simulation demonstrates that price-taking behavior is a natural result of the conditions that create perfect competition. In trials, there is a significant degree of price convergence in just three or four rounds. Students find this simulation to be a fun, educational experience that adds value to their understanding of competitive markets.

Keywords:

• competitive markets
• principles of microeconomics
• simulation

JEL codes:

• A22
• D41

Notes

¹All files used in the demonstration are available on my Web site: www.lucasmengelhardt.com.

²Thank you to an anonymous referee who noted this discrepancy.

³This modification also would allow for instructors who do not want to devote an entire class session to the demonstration to have more time for other activities.