Egg Drop Auction: Strategic factor mkts

EggDropThe essence of this exercise is simple. Teams must build a device that will catch an egg dropped from 25 feet (e.g., a stairwell). The trick is that they must build it from items purchased in an auction. As such, items that are easy to use (e.g., an old pillow) are very expensive while items that are hard to imagine a use for (a brick) are cheap. Profit is determined by 1) succeeding in the task of catching an egg and 2) having the lowest cost function. As such, this demonstrates Barney’s (1986) notion of superior expectations in strategic factor markets.

Now that you see where this is going, here are the rest of the details.

Step 1: Assemble resources. Collect together an assortment of (clean) trash. Prepare and display your trash on a large table. The amount of stuff will vary depending on the number of people & teams. A typical lot of trash for about three or four teams might include:

  • A few of the cardboard tubes left over from a roll of toilet tissue or kitchen paper. .
  • Some toilet tissue not too much about 20 sheets should do it. .
  • A plastic bag or two. .
  • Some elastic bands. .
  • A used paper cup (or two) . The kind you get a soft drink in at a fast food restaurant works fine. .
  • Some sticky tape (not too much). .
  • 20 or 30 paper clips .
  • Some string (again not too much, about four feet should do). .
  • Some tissue paper. .
  • A small box or two… empty cereal boxes or other empty food packages work fine. .
  • Wooden chopsticks. .
  • Some plastic drinking straws. .
  • An old newspaper or magazine. .
  • Something disgusting . A smelly old sock (optional) .
  • A few other useless things ..
  • a used bus ticket.
  • a brick ..(advisable)

Step 2: Team Instructions. Divide your people into teams. As mentioned above, teams of about four to six people are ideal. Get everyone together in front of you and the table but standing in their teams and introduce the activity. Explain to them that they have a task. It is:

  • To construct an egg catcher that will catch a raw egg dropped from about 21 feet (6 meters) in the air. Their egg catcher must be free standing (they can’t hold it).
  • They will be responsible for positioning the egg catcher – you will only drop the egg. To make the egg catcher they can use any or all of the materials they buy from you at the auction. But ONLY the materials that they have bought at auction. Nothing else. The auction will be competitive and (you) the auctioneer will try to get the best possible price for each item in the sale. The auctioneers decision is final.
  • Give each team the same amount of monopoly money (I use special egg money that I have made but this is a luxury). About $125 Egg dollars usually does the trick.
  • Show everyone the items in the auction. Hold each item up and give them a stereotypical auctioneers spiel about each item.

Step 3: Auction. “Ladies and gentlemen, here we have a classic artifact of the modern age, a plastic bag! Guaranteed at least 70% hydrocarbons ideal for building an egg catcher or wearing on the head on a rainy day. Just think ladies and gents, you could cut it open and used it as a picnic cloth; fill it with air and make a loud bang . Etc ”

  • After you have introduced each item, tell them they may approach the table and look but not touch!
  • After they have examined the goods remind them that how they bid; who bids; what they use and how they make their catcher is up to them. However, they can only use what they buy at auction, nothing else and the auctioneers decision on bids is final.
  • Give them the money and ask the teams to go and discuss their plans and strategies. Give the teams about 15 or 20 mins to do this privately (as teams). Go around and gently remind them of the task and that the auctioneers decision is final.
  • When everyone is ready, bring them back and auction off the items.
  • Go wild; go crazy; tell jokes; exaggerate the value of items. If you think it will sell well, start with a high price, if you think it will not sell at all put two items together as one lot. If someone nods or winks you can take it as a bid. (Life’s not fair. I got stuck with a broken radio at an auction once because the auctioneer thought I was bidding.) Raise the bids quickly … you get the idea …. it can take a little practice but you should get the hang of it pretty quickly. Make the auction fast paced and fun. Sometimes people from the same team bid against each other they get so carried away. All sorts of things happen.
  • As you sell, take the money and give them the items. Some things may have a reserve price and be removed from the sale if not sold. After everything is sold have them go away and build their egg catcher. USING ONLY the materials they have bought at auction. No borrowing, stealing ifs or buts. Notes: It is usually better to give the teams a time frame within which they must construct their egg catcher. Dont panic if one team buys hardly anything. Never give them additional materials. Amazingly people will construct quite effective catchers from virtually nothing and succeed while other teams with more and better resources can fail. After the catchers are made you can gather each team for a proud group photo.

Step 4: Build catchers. Now you need a location such as a stair well, window, balcony or such about 20 feet above the ground. Hold a raw egg in position. Have the first team position their egg catcher underneath you in the drop zone.. On their signal drop the egg. If their egg catcher catches the egg without the egg breaking they have “won” – that is they have succeeded. If not; they have not.

Debrief: Often teams find a good use for items that were not widely perceived as valuable (and can be purchased cheaply). This is the essence of strategic factor markets. The discussion proceeds along the lines of how and why some teams saw value while others did not. It also points out that the teams that succeeded in the task but had high cost functions did not prevail.

Caution on timing: While this is a good exercise, it is also time consuming. It is probably best for a strategy elective where you have more time (I used it in industry & competitor analysis).

General notes and advice:

  • Observe safety precautions at all times. Do not lean too far out over balconies or out of windows. Be careful not to dislodge debris or other material that might fall on people below. If you are using a knife or scissors or lighter to release the egg do not bring this out until everyone is clear. Even a small item can cause serious injury if dropped on you from 20 feet in the air! Put some paper on the ground to facilitate cleaning.
  • Have an extra egg ready. The first team often do not position the egg catcher exactly right and so I give them a second go at the end (as I do with any other team that fails because of poor positioning – as long as I have eggs).
  • Have some small prizes (key rings, for example) for the winning team … and then give one to everyone … because everyone is a winner.
  • You can make the dropping more exotic by: painting the eggs gluing string to the egg and burning the string or just using your imagination

Contributed by Russ Coff. However you can find this on SquareWheels where he originally found it.

13 thoughts on “Egg Drop Auction: Strategic factor mkts

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  3. I replaced the egg drop with the paper tower as the key activity, and it was an instant hit for the class. In addition to the surprise! useful items, students managed to use resources and find information outside of the provided items (e.g. water bottle and Googling how to make paper towers). There were also cases of alliance/ trade of resources, which adds to the discussion. Thank you for sharing.

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  5. Russ – I just finished some sections where I created a virtual version of this Egg Drop. What I did was I had students build a vehicle out of shapes that they could acquire in a bidding process. 19 lots of shapes for an 8 group class seemed to work. They bid on the lots and then used the shapes to create a vehicle. We judged based on function and form and the winner was the team with the highest margin (price based on ranking minus cost based on what they spent on shapes).

    I replicated some of the scarcity by requiring it to not be flying (avoiding the abstract spaceships) and it worked pretty well! The wheels and tank treads become hot commodities! Here is link I hope that works to this resource. I used a similar spreadsheet to the egg drop one to capture costs.

    • Brent – I love this idea. Many of the experiential exercises are hard to replicate online. Can we add this as a separate post? If possible, I’d like to get more detailed instructions. I wonder if there are some aspects one can do asynchronously while others may need to be in a synchronous (or maybe in-person) session.

      • Absolutely Russ. I have run this 4 times now and tweaked things even more. Changing my price ranking system to penalize poor designs a bit more and few other process things. I am doing this 100% synchronously, either all on Zoom or in a hybrid format (some home and some in class). Would be great to find a way to speed up or automate the bidding process because it takes long (but is fun!). They could definitely prepare as groups before hand and do the bidding synchronously.

        Will get a separate post going when I able to do so. But finding it is doing a good job of replicating the teachable moments like resources factor market pricing, bidding, complementary assets within a group, and equifinality.

  6. I’m happy to post when you get a chance. I stopped doing the auction because it was taking too much class time. I’m wondering if some parts can be asynchronous (teams bidding on Google docs, etc.) so more can be done outside of class time. Of course, the live auction itself is a lot of fun…

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