1. Unit 5: Silk Road & Trade

2. Simulation You are now part of a company.
There are 4 other companies who make the same product.
All of your products cost the same amount of money and take the same amount of time to make.
The 5 companies in this room are the only companies that make this product.
You each want to make as much profit as possible.

3. Companies – Period 4 Jason, Cameron, Sophie, Faith, Joe, Alan, & Kayla
Yuming, Ethan, Camden, Makayla, Allison, Shubham, & Michelle
Daniel, Samantha, Spencer, Kellan, Shayna, Frederick, & Delany
Rahul, Akhil, Ciara, John, Cassie, Michael, & Jessica
Simon, Bijon, Madison, Chris, Megana, Katelyn, & Tiffany

4. Companies – Period 5
Team 1: Kobe, Ian, Amy, Cooper, Annie, Mason, & Isabel
Team 2: Priscilla, Renee, Sayaka, Matt, Sharon, Lauren, & Julia
Team 3: Grace, Dora, Gracyn, Olivia, Thea, Dawson, & Melanie
Team 4: Brian, Ryan, Kate, Beck, Shami, Sarah, & Jacqueline
Team 5: Isa, Alex, Jessica, Evan, Keya, Nate, & Mara

5. Round 1 - Rules Each company has $150 to start.
You cannot spend more than you have.
It costs $30 to produce 1 unit.
You only know how many units you produce, you won’t know what other companies decide to produce.
You have 1 minute to decide how many units to produce.
Write down your company # and how many units you are going to produce.

6. Round 1 Team 1 Team 2 Team 3 Team 4 Team 5 Starting $ $150
# Units (x $30 each)
-90
-120
-150
-60 18
$ Left 60 30 90
Unit price (x # units)
+225
+300
+375
+150
Total
285
330
375
240

7. Results Price Market $125 0-6 $100 7-13 $75 14-19 $50 20-25 $30 27-32
$25
33-40
$20
41-50

8. Trade Summit
Nominate one member of your company to be your ambassador.
Ambassadors are going outside to talk strategy for a minute. How can your companies earn more profit?

9. Round 2 Rules It costs $30 to produce 1 unit.
You only know how many units you produce, you won’t know what other companies decide to produce.
You have 1 minute to decide how many units to produce.
Write down your company # and how many units you are going to produce.

10. Round 2 Team 1 Team 2 Team 3 Team 4 Team 5 Starting $ $285 $330 $375
$240
# Units (x $30 each)
-210
-120
-360
-180
-300 39
$ Left 75
210 15 60 30
Unit price (x # units)
+175
+100
+300
+150
+250
Total
250
310
315
280

11. Results Price Market $125 0-6 $100 7-13 $75 14-19 $50 20-25 $30 27-32
$25
33-40
$20
41-50

12. Review
How’d it go?
What did you like?
What was frustrating?

13. Cartels Real life example – the Oil Industry
Oil is a scarce resource (virtually everyone thinks this)
OPEC: Organization of the Petroleum Exporting Countries
Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Ecuador, Libya, the UAE, Algeria, Nigeria, Angola
Many countries have joined together to form an organization called OPEC [Organization of the Petroleum Exporting Countries]

14. Cartels OPEC agrees to cut & raise production of oil.
Goal : to secure a steady income for member countries & to secure a supply of oil to the world.
OPEC manipulates prices and profits.
Goal [stated from their web site]: to secure a steady income for member countries & to secure a supply of oil to the world.

15. Cartels 1970s: cartel was strong prices = high production = low
In the 1970s the cartel was strong…prices were high and production stayed low to keep those prices high.

16. Cartels 80s & 90s: prices up & down
motivation for profit was too great
Attempts to break the cartel: countries access more of their own oil
decreasing the overall % OPEC controls.
Some countries [ex. Iraq] wish to increase production less willing to listen to the other OPEC members.
In the 80s and 90s prices went up & down – the motivation for profit has been too great.
Recently many countries (US included) have attempted to break the cartel by accessing more of their own oil supplies - decreasing the overall % of oil worldwide that OPEC controls.
Additionally, some countries [ex. Iraq] wish to increase production to help solve their own problems. They have been less willing to listen to the other members of OPEC.

17. Cartels

18. Cartels
OPEC TODAY – The end of the Cartel? “The group is increasingly competing with new oil sources that are starting to chip away at its share in previously secure markets, while a shaky global economy keeps demand for oil at bay.” “It adds up to a nightmare scenario for the group. China, Russia and other countries are taking early steps to match the North American oil boom of recent years, which has the U.S. on track to overtake Saudi Arabia as the world’s largest oil producer.”

19. COMPETITION Companies acting together to set prices = a cartel
cartel = monopoly
Don’t last long; incentive for profit (by cheating) is usually too great
Prices aren’t actually set by one person/group – it is decided by a number of factors
When companies act together to set prices they are a cartel
When acting together, a cartel is a monopoly
Cartels don’t last long because incentive for profit (by cheating) is usually too great
Prices aren’t actually set by one person or