For Instructors: begin here.

How to run the Asset Market "Bubble" experiment

(Never use the word "bubble" when explaining the experiment: that is for the debrief)

In the "more" section shown above there is a link to academic papers and sources related to this experiment.

A note on debriefing: at the conclusion of the experiment the instructor sees and projects the experiment review screen (the pattern of trades), while the students see and report the final scores per team. The faculty screen does not show the team scores.

There is no upper limit on the number of teams that can compete.
 

Setting Up Kaivik: First Time Instructions
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The first time an instructor uses Kaivik they will set up a personal free account on the Kaivik server. This allows the creation of financial market experiments by using the Dashboard. The instructor needs to save a login email and password for future reference. If they forget their login information they will lose the history of prior experiments.

To get an account go to Kaivik.us
On the right side of the screen is the first time user email registration and password setup. After that the instructor can use the same registration and password for all future runs. The email does not have to be the users actual password, it can be any made-up password since it only acts as an identifier for locating past runs.    

The Dashboard will keep a record for each experiment run listed under a unique ten letter upper case run code, for example  "JTBGOHLPDM"

Each run of the experiment is linked to a unique “Room” labeled with the ten-letter run code. This allows retrieval of any prior run history provided the instructor keeps a record of prior run codes. 

When using Kaivik the word “room” actually means a single specific experiment run.

 
Setting Up Kaivik: Setting Up an Experiment Run

The order of steps for the instructor:
 
Have students divide into teams with two or more students each,  with one student acting as the data entry person on one device per team.

The device can be a laptop or a cellphone. There does not need to be an even number of teams. Three or four members per team seems optimal.

One team member will be typing buy/sell orders as the team trades. The other team members are strategists, monitoring the game play and telling the typist what to enter.

There is no upper limit on number of students on a team. Teams can have different numbers of members. 

After the instructor has set up teams they explain how teams will be competing in the trading market to make the most money.

it is recommended that in the spirit of experimental economics the winning team/s be rewarded with a generous amount of the instructor's cash to encourage competition.

Grade points should never be used as an incentive given the element of chance in the experiment.

Explaining the rules of the game to students.

The instructor warns students not to do anything more until they are explicitly instructed to. The instructor follows these steps:

• the instructor navigates to https://kaivik.us
• the instructor enters their login email and password
• On the Professor Dashboard, The instructor clicks add new “room” and records the unique new  ten letter room identification code (as well as the date and course) from the upper left text entry box
• Getting a ten digit code is actually a two step process, first the instructor types in a made up room name (for example  "room 1"). This triggers the creation of a ten digit code.
• The instructor clicks “Go to……” and enters the ten digit code for the new room that was added and now appears in Open Rooms
• The instructor sets up and announces to the class the parameter values:

           Number of rounds
           Initial cash endowment per team
           Initial share endowment per team
           Probability distribution of share                     dividends each round. 

• The instructor can choose to use the default parameter values that are already set up for a 15 round run.

​A sample short script for explaining the experiment

• You will divide yourselves into teams of at least three people
• One person will be entering bid/offer and quantity orders on one device: it can be a computer or cellphone
• The other team members are strategists, monitoring the trading and giving directions to the data entry person
• The item being traded is shares in an imaginary company
• You will be told the number of rounds, the Initial cash endowment per team; the initial share endowment per team; the probability distribution of share        dividends each round
• There will be a monetary reward of (instructor choice) dollars to members of the top two scoring teams
• You will be trading shares over 15 rounds
• You will start with these financial parameters (explain the parameter values you chose)
• At the end of the final round a share will will have no redemption value. A share is only valuable as long as it is generating dividends.
• You will trade using an order book system, that is, when you try to trade shares you must enter both the number of shares you wish to buy or sell and the price you are willing to trade at. You cannot enter just a price or just a number of shares.
• You offer to buy shares by "bidding". You offer to sell shares by "asking". You can switch as many times as you like between bidding and asking, you are NOT divided into fixed roles as "buyer teams" and "seller teams".
• Only at the the end of each round do you find out what was the dividend rate shares generated for that round. In other words, the firm may have a good round with shares generating a high return, or a bad round with shares generating a low return.
• Cash holdings will earn an interest rate at the local bank. So there is a return on holding cash. You will be told what the interest rate on cash is The interest rate will stay constant.
• You will not be able to see projected on your screen what is going on in the market. You have to infer what is happening in the market.
• The system will execute partial trades, that is, you may succeed in selling or buying  some shares at the price you quoted but not all that you wanted.
• You can adjust your buy/sell offers in real time, in the middle of a round.
• As you approach the end of the game the less valuable a share becomes because there are fewer dividends. At the end of the game shares effectively disappear and the only metric that counts is how much money your team has accumulated.
• OPTIONAL: we will now do a short five round practice so you understand the game.

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Running Kaivik after the game has been explained and student teams have been set up.

The order of steps for running the experiment are:

• Instruct students to navigate to https://kaivik.us
• Tell the students the room code for the run. Only one student device per team should join the waiting room for the game.
• The team types in a chosen team name, plus the correct room code, in the two boxes.
• Team names will appear at the bottom of the Professor Dashboard showing which teams have joined the game.
• The instructor clicks “Launch Room”.
• The trading interface will appear automatically on students’ cellphones and teams should begin trading immediately.
• Once the trading starts the instructor can monitor trading from the Professor Dashboard
   
• Teams can switch between bidding and asking within a round.
• The instructor can monitor the experiment progress via the Professor Dashboard, which projects the order book for the market in real time. The instructor can monitor the behavior of the market (and use recording software if desired for later debriefing).

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• Students cannot see the market order book during trading, students can only see their cellphone/computer  trading screen.

• At the end of the game the instructor will be switched automatically to a room review/debrief screen for projecting to the class. Each team will also see "End of Experiment".

 

• The instructor depends on the students to report on the team scores because the instructor screen only shows the pattern of trades.

• The end of game monetary scores will be available on the student teams screens. Use this information to reward the teams with the highest scores. At least the top two teams.
• Conduct a debrief on the pattern of trades and the reasons for the bubble behavior, the strategies of the teams, and the question of efficient market theory. The "more" section has links to sample material.