Faculty Author: Maurice E. Schweitzer

Students represent oil-producing countries and try to maximize profits by setting prices and production levels

Wharton’s oil pricing simulation OPEQ is used in negotiations courses to teach issues involving shared resources and incomplete information. 

It provides an experience-based learning tool that demonstrates principles of individual versus overall profit levels and the behavior of competitors in a closed market.

Students participating in OPEQ assume the role of an oil-producing country and set production levels in a competitive environment with little or no knowledge of their competitor’s intentions.

In the world of OPEQ, there are only three oil-producing countries. In a typical simulation, a small team of Wharton students assumes the role of the Oil Production Board for one country. They set production levels for each year with the goal of maximizing their own country’s profits. Pitted against that team are two other teams representing the other two countries. A group of three competing countries is termed a ‘World’. OPEQ is capable of simultaneously running and tracking games for multiple Worlds. This not only keeps team sizes manageable, it also provides data for comparative analysis on team strategy and performance.

All teams are given the same amounts and types of information, such as equations predicting the market price of oil and the resulting profit
margins. However, they are not informed of the production levels set by the other countries until they have set their own. Periodic unexpected
‘events’ further complicate the picture, forcing the teams to make decisions in an uncertain and changing environment.

After production levels have been set, the application computes and displays both individual country profits and total world profits and the next round begins.

The OPEQ user interface contains a number of features to help student teams make production decisions in their roles as oil-producing countries.

• The ‘Current Information’ area displays the data from previous rounds – here teams can see how much oil their competitors produced, how much profit they made, and what the price per barrel was.
• The ‘Demand Curve’ graph plots total world output and price per barrel for all previous years.
• The ‘Profit Analysis’ chart graphically displays the country’s profit and the total world profit for all previous years.
• Based on this historical information, teams enter their country’s output for the upcoming year in the ‘Future Production’ area.
• Messages from the game administrator can be displayed in the ‘Messages’ area.

OPEQ contains a rich set of administrative functions. The faculty member can create and schedule games and configure them to run in multi-
player or single-player.

The application also features real-time monitoring to allow the faculty member to track team progress. If the faculty member wishes to analyze the data from the finished simulation, he or she can download a spreadsheet containing all the data collected during the game. The spreadsheet contains production and profit levels per country per year and price per year. It also notes the timing of simulation “events” so that it is possible to extrapolate how external events affected team strategy.