Prevolio
Behavioral economicsClassroom · multi-user

The Bubble Game — Speculation & Herding

Trade a single asset whose true value is fixed and known. Each round, buy, hold, or sell — and watch the price detach from fundamentals, climb on herd buying, then crash. A vivid lesson that 'the price went up' isn't the same as 'it's worth more'.

You’ll learn: See how an asset with a known value can trade far above it — driven by the hope of reselling to a greater fool — and why chasing a rising price is risky.

Teacher guide

Students will learn to

  • See a price detach from a known fundamental value, inflate, and crash.
  • Feel the greater-fool pull: buying not because it's worth more, but because you expect to resell higher.
  • Connect the price path to real bubbles, FOMO, and the risk of chasing rising prices.

Before the session — ask

  • If everyone knows an asset is worth 20, could it still trade at 60? Why might someone pay that?
  • What's the difference between 'the price went up' and 'it became more valuable'?

After the session — discuss

  • How far did the price climb above the fundamental, and what happened at the end?
  • Who ended up holding shares when the price crashed — and why did they buy so high?
  • Where have you seen this pattern in real markets — crypto, housing, meme stocks?

Timing

  • Briefing & the rules3–5 min
  • Eight trading rounds8–12 min
  • Debrief & discussion8–10 min

Run it with your class

Students join with a code or QR — no account needed. Teachers start a session from the dashboard.

Join with a codeFor teachers

What is a speculative bubble?

A speculative bubble is when the price of an asset climbs far above its fundamental value — what it's actually worth based on the income or use it will deliver — driven not by that value but by the expectation of selling it to someone else for even more. The bubble game makes this stark by fixing the asset's true value and telling everyone what it is, then letting people trade. In theory the price should just sit at that known value; in practice it often detaches, climbing on herd buying as traders pile in because others are, then crashing when the buying stops. The engine is the greater-fool theory: you might knowingly pay more than something is worth if you believe a 'greater fool' will pay you even more later. That works until the last buyer is left holding an overpriced asset when the price collapses. The lesson is that a rising price is not the same as rising value — 'the price went up' doesn't mean 'it's worth more.' Bubbles show how herding and speculation can pull markets away from fundamentals, a caution behind historical manias from tulips to housing to crypto.

How the simulation shows it

You trade a single asset whose true value is fixed and known to everyone, choosing each round to buy, hold, or sell. Watching the price detach from that known value — climbing on herd buying, then crashing — shows the bubble form in real time, and makes vivid that chasing a rising price risks being the last one holding it.

Common misconceptions

Frequently asked questions

What is a speculative bubble?
When an asset's price rises far above its fundamental value, driven by expectations of reselling at a higher price rather than by the income or use the asset actually delivers.
What is fundamental value?
What an asset is really worth based on the cash flow or use it will provide. A bubble is a gap between this value and a much higher market price.
What is the greater-fool theory?
The idea that you can profit by paying more than an asset is worth if a 'greater fool' will later pay you even more. It sustains a bubble until no such buyer remains.
Why do bubbles crash?
Because the price is propped up only by continued buying and the hope of reselling higher. When that buying stops, there's nothing to support the price and it collapses toward fundamental value.
Does a rising price mean an asset is worth more?
No. A price can rise on herd buying and speculation while the asset's fundamental value is unchanged — which is exactly why chasing a rising price can be dangerous.