An Economist Plays Monopoly

Photo: HarshLight

A few days ago, I appeared on NPR Morning Edition talking about Monopoly (the game, not the market form).
Until then I hadn’t thought much about the economics of the game (which I played very often as a child, with our sons and for the past five years with our grandchildren).
Monopoly teaches us some useful economic lessons:

1. The very first event illustrates the diversity of people’s utility functions – I like the “Top Hat” piece, but others may prefer the racing car or the Scotty dog.
2. With only $1500 to start, you can’t buy everything you land on. This requires constrained utility maximization. (I never buy railroads or utilities early in the game, since I believe the payoff per dollar is less than buying a regular property.)
3. You need to optimize dynamically, since you should retain money to build houses and keep enough money to avoid bankruptcy if you land on others’ properties before they land on yours.