Make the Market

What this game teaches

Every share has two prices on the screen. The bid is what someone will pay you for it; the ask is what someone wants from you to sell it. The gap between them is the spread, and in this game you are the one who sets it.

Ordinary traders buy and sell for their own reasons, and each trade with them earns you a little of the spread. But some traders already know the true value. They only trade when your prices are wrong, and every trade with them costs you. You cannot tell them apart, so your spread has to be wide enough to cover what the informed ones take, and narrow enough that the ordinary ones do not walk away.

Where the idea comes from

This is the Glosten–Milgrom model, published by Lawrence Glosten and Paul Milgrom in 1985. It showed why a spread exists even when trading costs nothing at all: whoever makes the market has to charge everyone enough to cover losses to the few who know more. The more informed the traders, the wider the spread has to be.

How to play

Drag the chart up or down, or use the arrow buttons, to move your prices. The other pair of buttons widens or tightens the gap between them. On a keyboard the arrow keys do the same, holding Shift moves further, and P pauses.