Who Wants an iPad? An Exercise In Rationing

Abstract

This active learning exercise demonstrates the fundamental problem in economics that resources are scarce, while wants are relatively infinite.  Students are exposed to four mechanisms for rationing scare resources: markets, queue, coupons, and lottery.  An Apple iPad® pre-loaded with music, videos, and games is used as the good to be rationed. The uncertain value of the good allows for differences in willingness to pay.  Students are guided through an exercise that highlights the efficiency/equity tradeoffs in different allocation mechanisms by observing who gets the iPad in each round and whether any secondary market transactions occur to change the allocation.