11.OPEC Game Instructions (101210)

11.OPEC Game Instructions (101210) - Econ 489/689 Fall 2010...

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Econ 489/689 Fall 2010 Instructions for OPEC Strategy Game It is crucial to understand the operation of markets in order to appreciate the forces that determine prices and production levels in energy markets. We will “simulate” the world market for oil using an interactive strategy game developed by Severin Borenstein and James Bushnell (2004). Overview: In the OPEC game, seven independent countries each try to maximize their profits from oil production. The countries correspond (very roughly) to Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, Venezuela, and Nigeria. There is also production by the Rest of the World (ROW). In each period, each of the seven member countries of OPEC choose their production quantities. The ROW chooses production as a price taker in response to the price in the world market. The seven OPEC members may attempt to form a cartel and agree upon production quotas. There is, however, no enforcement mechanism for the quotas (other than economic punishments through the oil market). The ROW never participate in the cartel and always behave as a price taker. Strategy Choice:
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11.OPEC Game Instructions (101210) - Econ 489/689 Fall 2010...

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