Effect on Market Performance of Displaying Supply and Demand Curves in a Business Simulation

Abstract

A design-science study of how participants are affected by displaying market information in the form of supply-and-demand curves was conducted. Expecting that participants with grounding in economics will understand the displays and will use the information contained therein in their price-setting decisions, we hypothesized that the variance of prices should fall more rapidly over the initial periods of the simulation exercise when such displays are present than when they are omitted. Data from a before-and-after study supports the hypothesis, but does not suffice to rule out increased inter-industry competition as an alternative explanation. Nonetheless, the rapidly reducing price variances accompanying the display of supply-and-demand curves suggest that participants solidified their marketing acumen, a testament to their learning and reasoning. Re-search extending this study to simulations that model product markets mathematically is suggested.