Even people not involved in the stock market know how extremely volatile it can be. What causes stocks to fluctuate, though, as they have over recent years? In an attempt to answer this question, physicists Klaus Pawelzik and Felix Patzelt of the University of Bremen have developed an online game called “The Seesaw Game” to simulate the ups and downs of stock market investment.
At first glance it looks ridiculously simple: There is a seesaw – one side blue, the other red – on which three weights are placed: one blue, one red and another black. The latter keeps the seesaw in equilibrium. Two arrows are used, one blue and one red, to represent bets. The game is not to be played alone but with other online players. And each player is part of an experiment. The challenge is to guess what the other players will do, and to place your arrow on the side of the seesaw you think will tip upwards during each game. If you are right, you win – if you’re wrong, you lose a corresponding number of points. A highscore shows the players how they are doing.
Felix Patzelt, the theoretical physicist who programmed the game, explains: “When investing on the stock exchange, I want to achieve the highest possible price for my stocks. Therefore, when I think a stock is about to rise in value, I buy today in order to sell at a higher price tomorrow.” When I sell, though, I increase the supply of the stock, and it will subsequently fall to a lower price. This means that in order to be successful you have to behave differently from the majority of other investors. That is precisely what happens when you play the online seesaw game.
“In contrast to what classical economics teaches, whereby a system of bets and counter bets will eventually end in a balanced proportion, happenings on the stock exchange and the seesaw game reveal sharp fluctuations”, Felix Patzelt continues. Behind all this is a new mathematical model which the Bremen neurophysicists want to test and refine with the help of the game. “It boils down a sort of mass psychological experiment“, says Professor Pawelzik. “The cost of experimenting on this scale in the laboratory would be prohibitive; but putting the game online presents us with an opportunity to involve thousands of people and observe the results.”
Everyone who joins in the seesaw game can contribute towards arriving at a better understanding of how stock markets function.
Give it a try! Go to http://seesaw.neuro.uni-bremen.de
For further information, contact:
Universität Bremen
Institut für Theoretische Physik
Prof.Dr. Klaus Pawelzik
email: pawelzikprotect me ?!neuro.uni-bremenprotect me ?!.de
Dipl.-Phys. Felix Patzelt
Phone: +49 421 218 62005
email: felixprotect me ?!neuro.uni-bremenprotect me ?!.de
