Choosing Winners and Losers in a Classroom Permit Trading Game

This paper presents a classroom game in which students trade pollution permits. By changing the distribution of permits across firms, the game shows students how the allocation of property rights determines the winners and losers in the permit trading system but does not affect the efficiency of the system. This game can be used in a variety of classes, including principles or environmental economics, and can be conducted in a 50-minute class period with follow-up discussion in the next class.