Peer Review

Cartels and Competition

Material Detail page

Bookmark

Overall Rating:

Content Quality:

Effectiveness:

Ease of Use:

Overview:: This is a simulation. It uses iterative production decisions by students to
demonstrate for them how supply and demand interact to determine price in an
oligopolistic market and how the desire for profit affects the behavior of the
companies in the market. This active learning module provides a simulated real
world experience of how firms make production decisions with and without
collaborative opportunities.

Instructions for the simulation are provided as well as worksheets and materials
for students.
Type of Material:: Simulation
Recommended Uses:: This is designed as an in-class game covering an entire class period.
Technical Requirements:: An overhead projector would be helpful but even that isn't really needed. Data
can be displayed via a computer and projector if desired.
Identify Major Learning Goals:: The simulation should demonstrate the following principles:
a) incentives matter
b) increases in supply lead to reductions in price
c) cartels can increase market prices and their profits by restricting
production, and
d) the desire for profit undermines cartel agreements.
Target Student Population:: College students
Prerequisite Knowledge or Skills:: Some knowledge of supply and demand would be needed. The simulation has a
built-in down-sloping demand function as an assumption. Some previous discussion
of why that is rational would be helpful.

Rating:
Strengths:: This simulation is simple to run. The concepts needed by the students to make
their decisions are straightforward. The impact of their decisions should be
obvious and rational to them, and the impact on their subsequent decisions
should be predictable.

As long as the students are conscientious, the desired outcome (limited
production but cheating among cartel members) should be achieved fairly quickly.
Concerns:: The demand curve is assumed and fixed during the simulation. The simulation
doesn't demonstrate why that curve should be downsloping. It will demonstrate
that reductions in supply will increase prices, but that assumes that the demand
curve is fixed and downsloping. The assumption about the demand curve should be
explained to the students, as well as why that curve should be downsloping.

Rating:
Strengths:: This simulation should work well. And it should be fun for the students as well.
Depending on the attractiveness of the prizes, the teams could become quite
competitive. It more than adequately gives the instructor the ability to teach
students how cartels and competition works.
Concerns:: None

Rating:
Strengths:: This is a simple, easy to perform simulation. Almost no technology is required.
It would be helpful for students to have read the instructions before class, but
even that would not really be necessary.
Concerns:: Some discussion of the shape of demand curves should precede the simulation.

Other Issues and Comments:: Although little technology other than an overhead projector is needed, a
computer projection system with a spreadsheet to keep track of the production
and financial performance of the companies after each round would further
stimulate the competition.
Creative Commons: