Invariably, prices tend to drop as sellers try to take advantage of the asymmetric information in session 2. Discussion can focus on potential solutions to the 'lemon' problem, viz., warranties and regulations. Each student receives a cash endowment and 12 asset shares at the start of each trading session. The asset pays an uncertain dividend at regular intervals. The per share dividends are determined using a random draw from a uniform distribution.
Traders submit written bids to buy or sell a given number of shares at a limit price.
The instructor sorts the bids to buy and sell into demand and supply curves, thereby determining the market-clearing price and quantity. All trades occur at the same price. Post-game discussion can focus on whether trading prices converge toward intrinsic values or if a speculative bubble emerges. Journal of Economic Education . Spring 1999, pp.