Applied Economics Teaching Resources

an AAEA Journal

Agricultural and Applied Economics Association

Hedging with Futures: An Experiential Learning Game

John Michael Riley
Oklahoma State University

JEL Codes: A20, Q02, Q13
Keywords: Experiential learning, futures, hedging, teaching

Publish Date: January 7, 2020
Volume 2, Issue 2

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Abstract

Hedging is often an integral concept in agricultural futures and marketing courses as well as extension marketing workshops. Textbook and chalkboard examples offer students of these courses the ability to understand the concept and learn the mathematics. However, this mode of instruction is less intuitive and does not have a real-world feel. The purpose of this paper is to present an interactive hedging game that was developed to provide students with a more realistic hedging experience that improves the understanding of the mechanics of hedging. Under the premise of an eastern Nebraska corn producer using actual data, a spreadsheet was designed that displays market information to the students who then must make decisions about the number of futures contracts to trade. Pre- and post-game results indicate a positive learning outcome, and students responded favorably when asked if the game enhanced their understanding of hedging.

About the Author(s): John Michael Riley is an Assistant Professor in the Department of Agricultural Economics at Oklahoma State University (Corresponding author: john.m.riley@okstate.edu). Acknowledgements: The author acknowledges constructive comments provided by the Editor and two anonymous reviewers. Additionally, thank you to Wade Brorsen for helpful advice and suggestions with respect to measuring student learning outcomes. All errors are mine. The research received IRB approval at Oklahoma State University (AG-19-30).

Copyright is governed under Creative Commons CC BY-NC-SA

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