International Trade Simulation

Fred C. White
Agricultural and Applied Economics
The Universtity of Georgia
fwhite@agecon.uga.edu


Directions for Students   Supply and Demand Curves

Record of Trades    Computer Program





Directions for Students

Students are divided into small groups which operate as a single unit or team representing a hypothetical country. Each country is given either an excess supply or excess demand curve. These curves form the basis for determining the boundaries for the price and quantity to be traded. However, the price and quantity traded do not have to be precisely on the curves. It might be advantageous for sellers to sell for a higher price than indicated by the supply curve. Likewise, it might be advantageous for buyers to buy at a lower price than indicated by the demand curve.

The weighted average price for each seller and the quantity exported by that seller and the excess supply curve will be used to measure producer surplus for that country. Also, the weighted average price for each buyer and the quantity imported by that buyer and the excess demand curve will be used to measure consumer surplus for that country.


Objectives

Each exporter or seller should trade in such a way as to maximize producer surplus. Each importer or buyer should trade in such a way as to maximize consumer surplus. Sellers should sell for as high a price as possible. Buyers should buy for as low a price as possible. Since each country has a different supply or demand curve, its performance is evaluated relative to optimum trade under free market conditions. Hence, the country's performance is based on how well it does relative to the best it could do. Then all countries are ranked on the basis of this performance.


Rules

1. Countries 1, 2, 3, 4, 5 and 6 are sellers or exporters, while countries 7, 8, 9, 10, 11, and 12 are buyers or imporrters.

2.Sellers and buyers are given unique excess supply and excess demand curves, respectively, indicating maximum quantities that can be traded. If multiple trades are made by a country, the quantities are added together for a single production period.

3.An exporting country will negotiate privately with an importing country. Results of each trade (seller's number, buyer's number, price and quantity) must be recorded and reported at the end of each round.


Top of Page|| Directions for students|| Supply and demand curves
Record of trades|| Computer program
Fred White's home page



Link to supply and demand curves to be distibuted to students.
Supply and Demand



Top of Page|| Directions for students|| Supply and demand curves
Record of trades|| Computer program
Fred White's home page


Record of Trades

__________________________
Seller's Number ____
Buyer's Number ____
Price ____
Quantity ____
__________________________
Seller's Number ____
Buyer's Number ____
Price ____
Quantity ____
__________________________
Seller's Number ____
Buyer's Number ____
Price ____
Quantity ____
__________________________
Seller's Number ____
Buyer's Number ____
Price ____
Quantity ____
__________________________
Seller's Number ____
Buyer's Number ____
Price ____
Quantity ____
__________________________




Top of Page|| Directions for students|| Supply and demand curves
Record of trades|| Computer program
Fred White's home page

Computer Program


* This program is written for the software:
* Regression Analysis of Time Series (RATS)
* Instructions on data are in blue letters.
* Data to be entered by the user is highlighted in bold red letters.
* Revised 4/26/97

OPEN OUTPUT A:O

* IRND IS ROUND NUMBER
IEVAL IRND = 2
IEVAL IYEAR = 1997

* NUMBER OF TRADES
IEVAL NTRADES = 12

* NUMBER OF TEAMS
IEVAL NTEAMS = 12
IEVAL MAXTEAMS = 12

DECLARE RECT DATUM(NTRADES,4)
DECLARE VECT P(NTEAMS) Q(NTEAMS)
DECLARE VECT ES(NTEAMS) ESBASE(NTEAMS)
DECLARE VECT PERFORM(NTEAMS)
DECLARE RECT PARAMS(MAXTEAMS,2)

* NEGOTIATED TRADES
* 1ST COLUMN IS SELLER NUMBER
* 2ND COLUMN IS BUYER NUMBER
* 3RD COLUMN IS PRICE
* 4TH COLUMN IS QUANTITY

INPUT DATUM
1 7 11 2
1 10 11.50 3
1 12 10 1
2 9 12.5 4
3 12 11 2
4 10 11 3
4 7 11 3
5 12 12 5
5 10 11 3
5 9 13 4
6 11 12.5 4
6 9 11 1

COMPUTE P = %CONST(0.0)
COMPUTE Q = %CONST(0.0)

* FINDS AVERAGE PRICE
DO I = 1 , NTRADES
DO J = 1 , 2
IEVAL K = 0
:1 IEVAL K = K + 1
IF K BRANCH 1
EVAL Q0 = Q(K)
EVAL P0 = P(K)
EVAL Q(K) = Q(K) + DATUM(I,4)
EVAL P(K) = DATUM(I,3) * DATUM(I,4) / Q(K) $
+ P0 * Q0 / Q(K)
END DO J
END DO I

DO I = 1 , NTEAMS
DISPLAY I P(I) Q(I)
END DO I

INPUT PARAMS
8 1.0
9 0.5
8 0.5
9 0.5
9 0.5
9 0.5
14.5 -.5
14.5 -.5
15.5 -.5
15.5 -.5
16 -.66667
18 -1.


EVAL PARAMS(11,2) = -2. / 3.

* ECONOMIC SURPLUS
IEVAL HTEAMS = NTEAMS / 2
DO I = 1 , HTEAMS
EVAL A = PARAMS(I,1)
EVAL B = PARAMS(I,2)
EVAL ES(I) = P(I) * Q(I) $
-(A*Q(I) + .5*B*Q(I)**2)
END DO I
DO I = HTEAMS + 1 , NTEAMS
EVAL A = PARAMS(I,1)
EVAL B = PARAMS(I,2)
EVAL ES(I) = -P(I) * Q(I) $
+(A*Q(I) + .5*B*Q(I)**2)
END DO I

INPUT ESBASE
8 9 16 9 9 9 6.25 12.25 6.25 12.25 12 18

* IRND==1
* 8 9 16 9 6.25 12.25 12
* IRND==2
* 10.5 12.9375 21 12.9375 2.25 6.25 6.75 12.5
* IN THE FUTURE CHANGE 1 T0 11.375
* IRND==3
* 5.45 5.29 10.89 14.75 8.8 15.54

DO I = 1 , NTEAMS
EVAL PERFORM(I) = 100. * ES(I) / ESBASE(I)
DISPLAY I ES(I) ESBASE(I) PERFORM(I)
END DO I

* FINDS AVERAGE PRICE
EVAL QTTL = 0.
EVAL PERFTTL = 0.
DO I = 1 , NTEAMS
EVAL QTTL = QTTL + Q(I)
EVAL PERFTTL = PERFTTL + PERFORM(I)
END DO I
EVAL PRICE = 0.
DO I = 1 , NTEAMS
EVAL PRICE = PRICE + P(I) * Q(I) / QTTL
EVAL PERFAV = PERFTTL / NTEAMS
EVAL QAV = QTTL / NTEAMS
END DO I

* VARIANCE OF PERFORMANCE
EVAL VARPERF = 0.
DO I = 1 , NTEAMS
EVAL VARPERF = VARPERF + (PERFORM(I) - PERFAV)**2
END DO I
EVAL VARPERF = VARPERF / (NTEAMS-1.)
EVAL STDEV = SQRT(VARPERF)
EVAL CVAR = 100. * STDEV / PERFAV

* RANKING OF TEAMS
{

DISPLAY
DISPLAY
DISPLAY ' AGRICULTURAL TRADE MODEL '
DISPLAY
DISPLAY ' YEAR ' ####.## IYEAR
DISPLAY ' ROUND ' ####.## IRND
DISPLAY ' AVERAGE PERFORMANCE ' ####.## PERFAV
DISPLAY ' COEFFICIENT OF VARIATION ' ####.## CVAR
DISPLAY ' AVERAGE PRICE ' ####.## PRICE
DISPLAY ' AVERAGE QUANTITY ' ####.## QAV
DISPLAY
DISPLAY ' TEAMS RANKED BY PERFORMANCE'
DISPLAY
DISPLAY ' NO. PERFORM QUANTITY PRICE'
EVAL ZPERF = -10000
DO J = 1 , NTEAMS
IEVAL K = 0
EVAL RPERF = -10000
DO I = 1 , NTEAMS
IF PERFORM(I) > RPERF
{
IEVAL K = I
EVAL RPERF = PERFORM(I)
}
END DO I
DISPLAY ####### K #####.## PERFORM(K) #####.## Q(K) #######.## P(K)
EVAL PERFORM(K) = ZPERF
END DO J
}
END
END

END


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Directions for students|| Supply and demand curves
Record of trades|| Computer program



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