# The Candy Auction

(Photo: Susana Fernandez)

As I do each year, I auctioned off candy (this year Reese’s peanut butter cups) to my class.  None were bought at a price above \$0.50, all 23 were sold at that price. As usual, a nice illustration of downward-sloping demand curves.  I had kept one piece at the start, extolling its taste while eating half of it (and thus presumably causing an increase in demand).  The other half fell off my lectern, and I stepped in it after returning to the front of the room.  The first half piece of candy was really tasty, and I was dying for another one.

What to do?  Aha — I started bidding for one from the students who had bought mine.  At an offered price of \$0.02—nothing; \$0.25 — nothing; even at \$0.50 — nothing,; \$1 — nothing. Finally at \$2 one student offered me a peanut butter cup.  So because I stepped in it — literally — I got to illustrate upward-sloping supply curves too.

1. Jim says:

Perhaps you should try auctioning off the stepped-on half as well? Then, you can demonstrate a student’s reservation price for ending the illustration and getting on with the class?

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2. Seminymous Coward says:

If you liked the double illustration, then you should clearly always “change your mind” to want one more than you kept for future classes. There’s no reason to make a mess.

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3. Heraklit says:

Upward sloping supply curves are an rhetorically elegant but theoretically not really satisfying way to explain your result. If the first person willing to sell a candy was doing so only at a price of 2\$, why did you have to sell your last candy at a price of only 0,5\$? I mean at least the person with a reservation price of 0,5\$ should have been willing to sell her candy at a price somewhat higher than 0,5\$ ? Until I receive a satisfying explanation, I will claim that microeconomics does still not know much about real peoples’ economic decision making 😉

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4. Tom LL says:

You also got to experience loss aversion

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5. DavidS says:

Sounds to me like you illustrated the endowment effect.

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