Simulations and games in economics education

A simulation game is 'a game that contains a mixture of skill, chance, and strategy to simulate an aspect of reality, such as a stock exchange'. Similarly, Finnish author Virpi Ruohomäki states that 'a simulation game combines the features of a game (competition, cooperation, rules, participants, roles) with those of a simulation (incorporation of critical features of reality). A game is a simulation game if its rules refer to an empirical model of reality.' A properly built simulation game used to teach or learn economics would closely follow the assumptions and rules of the theoretical models within this discipline. A simulation game is 'a game that contains a mixture of skill, chance, and strategy to simulate an aspect of reality, such as a stock exchange'. Similarly, Finnish author Virpi Ruohomäki states that 'a simulation game combines the features of a game (competition, cooperation, rules, participants, roles) with those of a simulation (incorporation of critical features of reality). A game is a simulation game if its rules refer to an empirical model of reality.' A properly built simulation game used to teach or learn economics would closely follow the assumptions and rules of the theoretical models within this discipline. Economics education studies recommend the adoption of more active and collaborative learning methodologies (Greenlaw, 1999). Simkins (1999) stated '… teaching practices, which rely heavily on the lecture format, are not doing enough to develop students' cognitive learning skills, attract good students to economics, and motivate them to continue coursework in the discipline.' (p. 278). This is consistent with the results of a survey published in the American Economic Review by Allgood (2004) that shows that students 'rarely take economics as a free elective – especially beyond principles.' (p. 5). More is needed to be done in the classroom to excite students about economics education. Simulations supplement the standard lecture. Both computerized and non-computer based simulation and games show significant levels of growth in education (see Lean, Moizer, Towler, and Abbey, 2006; Dobbins, Boehlje, Erickson and Taylor, 1995; Gentry, 1990;. Through a simulation game, students may participate directly in a market by managing a simulated firm and making decisions on price and production to maximize profits. An excellent review of the use of a successful market simulation is given by Motahar (1994) in the Journal of Economics Education. A monopolistic competition simulation game can be used as an example in the standard economics classroom or for experimental economics. Economic experiments using monopolistic competition simulations can create real-world incentives that may be used in the teaching and learning of economics to help students better understand why markets and other exchange systems work the way they do. An explanation of experimental economics is given by Roth (1995). Assumptions of monopolistic competition A simulation game in monopolistic competition needs to incorporate the standard theoretical assumptions of this market structure, including: In a simulation of monopolistic competition, each firm must be small in size, and should not be able to influence the direction of the overall market. Yet each firm has some control over price owing to product differentiation. To be consistent with economic theory, the simulation model should allow entry of new firms to occur as long as profits are greater than normal, and economic profits exist. The entry of new firms will decrease the market price, and eventually cause economic profits to return to zero (see Baye, 2009). Controllable decisions in monopolistic competition