Economics and the Paper River

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Paper River and Negative Externality Within the Eco 410 experiment lineup, I elected to cover the Paper River experiment that gave a hands-on approach to the Coase Theorem and Negative Externality. In class, a simulation market was created using separate multiplication and paper airplane “firms”, where the effects of each aforementioned concepts could be aptly expressed and experienced. The Paper River, in juxtaposition to reality, would obviously differ because of its virtually endless supply of resources (paper). In the real world, there’s almost never an absolute advantage to the degree that a firm wouldn’t have to pay (especially in a firm that produces goods) for raw materials. During the duration of this particular experiment, airplane and multiplication firms weren’t completely parallel to the Coase Theorem for this simple reason: they were using capital (or participation points, in this case) as the airplane firm’s compensation for the multiplication group’s paper use and by default, were destined to make a decision to become a joint venture in order to benefit both firms—even if it wasn’t completely summed up by Coase’s Theorem. TREATMENT 1 | TREATMENT 2 | ROUND 1 | ROUND 2 | ROUND 1 | Multiplication | Airplanes | Multiplication | Airplanes | Multiplication | Airplanes | 3 | 6 | 4 | 8 | 2 | 10 | 3 | 8 | 2 | 10 | 1.5 | 10 | 5 | 2 | 4 | 6 | 5 | 10 | 1 | 10 | 0 | 10 | 0.5 | 10.5 | | | | | | | 3 | 10 | 3 | 4 | 6 | 10 | | | | | | | 3 | 10 | 1 | 10 | 3.5 | 10.5 | 5 | 4 | 3 | 8 | 4.5 | 10.5 | 4 | 10 | 5 | 10 | 1.5 | 10.5 | 6 | 2 | 4 | 6 | 7 | 10 | 4 | 6 | 4 | 8 | 5.5 | 8.5 | 4 | 4 | 4 | 6 | 4.5 | 10.5 | 4 | 6 | 4 | 4 | 5 | 10 | 4 | 10 | 4 | 8 | 4 | 10 | 5 | 4 | 4 | 8 | 5 | 10 | 6 | 8 | 7 | 10 | 6.5 | 10.5 | 4 | 6 | 4 | 8 | 2.5 | 8 | 4 | 6 | 3 | 10 | 4.5 | 10 | 2 | 8 | 3 | 8 | 2.5 | 8.5 | 8 | 10 |

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