You begin your journey by managing a monopoly firm with no direct rivals in a stable economy. Your firm is producing a perishable product so you must be careful not to overproduce. Once you succeed, so will the challenge! The number of rival firms in the market will increase to 9 and you will be placed in a market called “oligopoly”. Although there are some rival firms, you will have a significant market share and the ability to differentiate your product and build brand loyalty. But do not drop your guard because your rivals are also large and powerful, and can have a substantial impact on your sales if they decide to become aggressive. After you have proven your ability to succeed in this market, you cannot rest on your laurels. The challenge (and fun) continues to increase! Now you have the privilege of showing your worth (economic skills) by managing a firm in a highly competitive market starting with 25 rival firms! And to further add to the challenge, new firms may also enter this market and compete with you. In this case, you will need to figure out how to keep the customers you have or attract more customers when the numbers of rival firms increase. In this environment you will need to carefully determine the right price to succeed, so do not get too greedy! Good luck and most of all have fun. Remember, you are a true winner, no matter how you perform in the game, if you learn from the experience.
The simulation games are organized on two levels: Introductory and Advanced. The major differences in the game levels are: the number of controllable firm decisions, whether the economy is stable or changing, and the focus on short-run versus long-run decision-making.
At each level (Introductory or Advanced), the order of the games that you are asked to play lead you through a “step-wise learning process". The introductory level starts with only two controllable firm decisions, a stable economy and no random economic events. Next, a third firm decision is added and the number of firms in the market increases from 1 to 9 and then to 25 firms. After learning to succeed at the introductory level, the advanced level adds a fourth firm decision that permits long-run analysis, and the possibility of changing economic conditions (business cycles and random events).
Introductory Level – Learning Objectives
- Understand the relationship between price, quantity demanded and the revenues of the firm; and be able to apply this knowledge to maximize revenues considering price elasticity and marginal revenues.
- Be able to measure and understand the relationship between production, average costs and marginal costs in the short-run when plant size is fixed and the economy is stable; and apply this knowledge to make a more effective production decision.
- Be able to apply concepts of marginal revenues and marginal costs to maximize profits in the short-run when plant size is fixed and the economy is stable.
- Understand how different market structures, from monopoly to highly competitive, achieve equilibrium in the short-run; and be able to use this information to make more effective business decisions.
Advanced Level – Learning Objectives
- All the objectives in the Introductory Level plus being able to evaluate the long-run impacts of your decisions for maximizing profits and achieving equilibrium.
- Be able to predict how a changing macroeconomic environment, with the possibility of business cycles, inflation, and changing economic events will influence outcomes.
- Understand how different market structures achieve equilibrium in the long-run including: Monopoly with only 1 firm supplying the entire market; Oligopoly with only a few rival firms; and Monopolistic Competition with many rival firms.
- Being able to develop effective business strategies, maximizing long-run profits, considering different market environments from monopoly to highly competitive markets.