For many of us, our first exposure to running anything like a business was the first game of Monopoly we played as children. This is somewhat problematic, to say the least. In Monopoly, the only purpose of acquiring properties and developing them is to slowly bleed your friends of all their money, giving them nothing in return.
There’s a better game out there; one that captures the nuances of capitalism while also being simpler and, frankly, more fun than Monopoly. That game is Karsten Hartwig’s 1999 classic, Chinatown.
The Quintessential Trading Game
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The game establishes a few simple rules for creating value and then it just lets things happen.
In Chinatown, players take on the roles of Chinese-American immigrant businesspeople in the 1960s. Each round, they acquire properties in Lower Manhattan’s Chinatown along with business tiles that can be used to place certain types of businesses on those properties. The most profitable businesses can be formed by combining enough business tiles of the same type on adjacent properties to make one full-sized business, such as a laundromat, dim sum restaurant, garment factory, or florist.
The majority of the game is spent during each of the six trading phases, during which all players can simultaneously negotiate with each other to trade properties, tiles, and cash until everyone has made every deal they want to make. This is the beauty of Chinatown: the game establishes a few simple rules for creating value, it assigns basic property rights over the tools necessary to create this value, and then it just lets things happen. The trading emerges naturally from the circumstances as each player realizes that he could be much richer if he only had that one property his friend just drew.
It’s pure, it’s fun, and you should absolutely play it if you get the chance. But what can it teach us about markets?
What Chinatown Teaches Us about Markets
I’ve played Chinatown with many different groups of people, and similar dynamics emerge each time. There are three general lessons it can teach us.
Lesson One: Markets encourage us to pay attention to what others need, not just what we want.
Shrewd players will pay attention to what others need in order to choose between these properties.
When players draw properties at the start of each round, they are forced to discard some and keep others. Odds are, players will be looking at a lot of cards that aren’t individually helpful to them.
Shrewd players will pay attention to what others need in order to choose between these properties. Properties that are adjacent to other players’ incomplete businesses are more valuable than properties sitting alone in a corner. Even if you yourself don’t need a particular property, the ability to sell or barter it makes it valuable.
Lesson Two: Cooperation trumps spite.
One situation that will often arise is that your friend, let’s call her Alice, is waiting for a particular property to complete her antique shop. More often than not, someone other than Alice will draw that property.
But in Chinatown, there’s no point in obstructing other players.
Now, there are two possible courses of action you could take after drawing the property Alice needs. First, you could refuse to trade it to Alice, opting instead to put another business there to block Alice’s antique shop from ever being completed. Second, you could trade the property to Alice so she can complete her business.
I have only ever seen players use the second strategy, the cooperative one. Blocking is a common tactic in other games, such as The Settlers of Catan where players can build roads and settlements to block each other from accessing certain areas. But in Chinatown, where players have complete property rights and the ability to trade anything and everything, there’s no point in obstructing other players.
If your property is worth $100,000 to Alice and only $20,000 to you, you can both be better off by trading instead of acting out of spite. At a price of $60,000, you and Alice are both $40,000 richer than you would have been. In the context of the game, that means you and Alice have both raised your chances of beating the other players at the table.
Lesson Three: More sellers mean lower prices; more buyers mean higher prices.
Supply and demand are usually explained in the context of so-called “thick” markets, with many buyers and sellers trading a high volume of goods. As a game for 3 to 5 players, Chinatown’s markets are always “thin” markets, with a small number of buyers and sellers trading a small number of discrete assets. This means that you usually can’t find a clear equilibrium when it comes to prices, but there are still patterns that emerge depending on how many people want to trade a given asset.
Chinatown’s markets are always “thin” markets.
Often there will be only one buyer and only one seller trading a single unique asset, and the price, in that case, comes entirely down to haggling. But perceptive players will notice the dynamic radically change when there are more potential traders.
Returning to the example I used above, what if Alice needs one property next to her antique shop to complete it and both Bob and Chris draw adjacent properties on the same turn? This situation happens fairly frequently in the game. If Bob demands $60,000, Chris can offer a price of $50,000, and so on until Alice gets a very good deal on the property she eventually buys.
Similarly, although less frequently, you sometimes see bidding wars between buyers. For example, it takes four florist tiles to make a complete florist business, but there are only seven of these tiles total in the game. If two players both attempt to build a florist, they may have to bid aggressively for the seventh tile.
The great thing about the market dynamics of Chinatown is that they emerge organically from players’ decisions.
Chinatown is far from the only excellent economic board game on the market. Power Grid, Food Chain Magnate, Brass, and hundreds more economic games explore themes of trade and commerce. But Chinatown stands out as a particularly elegant example of the genre.
From an economics perspective, the great thing about the market dynamics of Chinatown is that they emerge organically from players’ decisions. In many games, the economics of the game come from the mechanics created by the game designer. These are often clever and inventive, and in many cases, they reflect interesting observations about markets. But nothing quite beats the way Chinatown sets up the most simple of rules and lets the players discover the benefits of trade for themselves.
Garrett M. Petersen is a Ph.D. candidate in the economics department at Simon Fraser University. He hosts the podcast Economics Detective Radio.
This article was originally published on FEE.org. Read the original article.