Simulation

Background Information

Welcome to Will World.  After forming and naming your companies, you should be ready to start your business.   Your goal is to maximize the value of your company.  Each round you will be provided with a variety of options to grow your company.

  • The initial funds for your company come from your accumulated Cuttlebucks.  You will use these funds to purchase resources and capital equipment, hire employees and make other investments in your company.
  • Circumstances will change throughout the game. You can keep up with the news of Will World by reading the Will World Words blog.  Important information about changing economic conditions in Will World will be posted on a regular basis.  It is up to you to stay informed.
  • As is normal in the business world, but not always in economic modeling, you will not have complete information.  The choices available to you and the responses of the citizens of Will World will fit within standard economic models but you will not be given the numbers used in the models.
  • There will be some limits on what you can do in the game.  This is to allow for easier decision-making and easier modeling.
  • The government of Will World is willing to listen to any and all suggestions from the business community.  Laws and policy can change if the government believes the changes are in the best interests of the citizens of Will World.

Will World

  • The citizens of Will World (Willians) are diverse.  They vary in income, employable skills, and product preferences.
  • Right now, most Willians are willing and able to buy Macs and Lyons.   They are willing to buy Macs for between $0 and $3.35  Cuttlebucks.  They are willing to buy Lyons for between  $0 and $2.45 Cuttlebucks.
  • Instead of months, Will World divides units of time into cycles.

The Labour Market

  • Once you hire an employee, they work for you until you fire them or they quit at the wage that you originally set.
  • Unhappy, underpaid workers who can find other work will quit if you do not respond to their demands.
  • Employees must be paid for the full cycle even if you don’t produce a full cycle’s worth of goods (10 increments).  If you choose to produce 8 increments, you still must pay for employees for the full 10 increments.

Energy

  • Energy resources are purchased on the open market.  There is one price for energy that fluctuates with global market conditions.
  • The energy materials are extracted and refined by many firms located around the world.  Currently there are no concerns about depleted resources.
  • All energy is the same quality and can be used in all machines.  The same energy is used to transport goods.

Raw Materials

  • You may have heard in the previous semester that there was a shortage of raw materials.  That was not meant to happen.  You should not need to worry about raw materials shortages in the initial stages of the game.
  • Raw materials are purchased from one of three resource firms.  You can choose whichever firm you’d like.  There is no difference, in the early stages, between the quality of raw materials from the different firms.

Production

  • You decide how many units to produce each round.
  • In the initial rounds of the game you are price takers, meaning you will sell all your goods but you won’t know the price.
  • In later rounds of the game you are price makers, meaning you can set your price but you aren’t guaranteed to sell all your goods.
  • You must already own or purchase the materials needed to produce your units during the current round.

Prices

  • During the initial rounds of the game, you will have to accept the market price.  As conditions and products change, you will have more control over the price you charge for your goods.

Government Monitoring

  • The government may audit your records at any time to ensure you are correctly tracking your resources.
  • You may at any time request a verification of your figures by the government.

Purchasing

  • During the round you must purchase your inputs.  If you don’t purchase enough inputs to meet your production levels, those units will not be produced.
  • If you run out of some of the resources required, you will not make the units but you will use up the other resources you have.
  • For example, say you want to produce 100 Macs and you have enough energy and labour but run out of raw materials.  You will use up the energy and labour for those 100 units but not have any units at the end.

Costs

  • In addition to the cost of purchasing energy and raw materials and hiring labour, you will also have to pay a manufacturing cost per 100 units.
  • This cost includes

–        Wear and tear on the machine

–        Overhead costs

–        Transportation costs

–        Depending on your choices during the game, you may see additional costs.

  • You can stockpile energy and raw materials.  You can’t do this for labour.

Competition

  • Along with the six companies formed in class, there will be four other companies in the market.  These companies will be making the same decisions you are each round.

Reputation Points

  • Later in the game you will have the opportunity to earn reputation points.  These points help determine the popularity of your firm with the citizens of Will World.
  • Poor decision-making or improper conduct during the game can cause you to lose reputation points.

External Factors

  • Remember, things happen.  Do not expect conditions to remain constant.
  • Changes you can expect:

–        Price for Lyons and Macs

–        Price for raw materials and energy

–        Labour market conditions

–        Demand for Lyons and Macs

–        Machinery available

–        Interest rates and other macroeconomic conditions

–        International trade and competition

–        New information sources

Information

  • Companies are free to publish press releases at any time during the game.  Submit your press releases to willworldwords at gmail dot com
  • Your suppliers will release sales offering on the Will Words blog – willworld.wordpress.com.  Occasionally they may make special offers.
  • Every three rounds each company will be expected to provide a ‘quarterly’ report detailing the value of your company.

Structure of the Game

  • Decisions will be made on simulation days.
  • Sales results will be distributed during the following simulation day.
  • The Will World Words, the local news blog, publishes posts frequently but there is no set publication schedule.  You are advised to check back regularly.
  • The only numbers that will be announced publicly are the total number of units sold and the market price.

Responsibilities

  • You need to keep track of your funds, resources, machinery and inventory.
  • This is where students in your group who have taken accounting will come in handy.

Evaluation

  • This is an evaluated project worth 15% of your final grade. Your goal is to make as much money as possible. At the end of the game your total worth will be determined based on the following formula
  • Cuttlebucks + Investments + purchased machines x 80% + inventory x 40% + fuel units x market price + raw materials x market price.
  • As a group, you will be required to produce a brief annual report after the final round that describes your company and details your success and failures as a business.  More details will be provided closer to the due date
  • As an individual, you will be required to produce a written response that includes:

–        Advice to next semester’s students on the best decisions to make

–        Suggestions to improve the functioning of the game

  • On the exam you will be expected to answer a question on the economics of Will World. (Details of the question to be provided closer to the exam).

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