Environmental Economics

I used VEconLab's demand experiment in my sophomore level introduction to environmental and resource economics course this week:

This exercise introduces the notion of demand as a function with "steps" that represent maximum willingness to pay, i.e. the marginal value of consumption. Step function graphs facilitate a subsequent understanding of buyers' surplus, since the area under demand can be calculated visually. … The exercise is designed to highlight the importance of making decisions at the margin, since purchase decisions based on comparisions [sic] of average values and purchase price will lead to lower earnings. One treatment option involves adding a tax to be paid for each unit purchased, which can lead to a discussion of demand shifts. Learning is enhanced by feedback about relative earnings.

I used it to illustrate demand curves (the course has no prequisite) and consumer surplus. I motivated the tax as a tax on pollution. There were 20 rounds, 10 without the tax and 10 with the tax. I estimated the OLS model with 64 students, 20 rounds (clustered standard errors):

The $2 tax reduces quantity by 1/2 units. The estimated choke price is $22 with a confidence interval that does not include the theoretical $18 choke price. 

Here are the results for the no tax treatment (round 10):

Here are the results with the tax (=$2) treatment (round 20):