Eurogame: a virtual economic system
Friday 14 Dec 2018 01:49   Now playing round 318
Next round begins at  Sun 28 Dec 2014 14:00 CET
 
Guide to the game
English version: Catia Galli and Valery Authers

Description of the virtual economic environment

  1. The players will receive a group of virtual companies to manage. The aim of the game is to make your business grow, both single companies or group of companies.
  2. The virtual economic system, which we have imagined, is made up of 16 macro-sectors or industries, each one characterised by a product, priced by the Market (s. Economic Bulletin).
  3. On the basis of the information taken from the Economic Bulletin, each entrepreneur has to decide whether to increase or to reduce the output. It is possible to reach this aim by choosing the right combination of workers and capital-machines.
  4. The raw materials (or services) technically indispensable are determined on the basis of fixed production coefficients, making the structure of the economic model supporting EUROGAME, and are bought on a 'just in time' basis. So you have no stocks to manage.
  5. The locking up of durable equipment, whose value is given by the owner's capital and the obtained long-term financing, is another simplification. The final demand of gross investments is given, physically, by completely homogeneous multipurpose equipment, named Capital Units. Its quantity is determined by the price of each unit, the same for all the industries, and by the choices that the 'businessmen' will have made. To get the desired volume of output they will have to take into account the necessary Capital units, on the basis of the physical production that each unit of capital has in the industry it operates.
    On the beginning, for example, if each unit of capital has a price, in a given year, of 16,000 € and the durable equipment is worth 8,000,000 €, the available units of capital at one's disposal are 500. Given a physical productivity of 100 in the industry in which the enterprise operates, the output technically obtainable is then 50,000. But it is not sure that it will be so. As a matter of fact, the actual quantity will also depend on the number of workmen, clerks and managers operating in the enterprise. These should be in such a proportion to the desired quantity so that you'll be able to produce only the minimum allowed by the productive factor (units of capital or workers of the three categories) which results relatively scarce compared to the others.
    If instead of 80 workmen necessary to produce 50,000 units of goods, the enterprise has only 60, the effective production will be 37,500. The same is for clerks and managers, who are also considered directly connected to the output. As a consequence, the productive factors in surplus will uselessly raise the production cost or in the voice Depreciation or in the voice Labour Cost.
  6. To complicate the calculations is the fact that, once the best ratio among the three different categories of workers and the units of capital is known, (see How to get an efficient combination of the productive factors), it slowly varies in the years to take into account the growth of productivity caused by the betterment of technology.
    The units of capital already owned are affected by a loss of productivity according to the depreciation process. (example)
  7. In order to reach their output targets, the enterprises must employ or dismiss workers. With regard to this, the model adopted forecasts that the new-employed have a reduced productivity, for the first year (i.e. round) only, of 25% if workmen, of 33% if clerks, of 50% if managers.
    Please be aware that the workers you're going to enter when making your first choose are all new employed necessarily.
  8. Costs are not considered in case of dismissal because they only weigh upon the available cash of the company. An important scale effect can be obtainable in case a player runs more than one enterprise (Group); in this case the management of the personnel becomes easier because possible overmanning can be employed in another firm of the group, without training, so avoiding loss of productivity.
  9. The moving from a category of work-force to a superior rank halves the necessary period for the training in the new position, so reducing loss in productivity.
  10. In case of contextual promotion to the moving from one firm to another, belonging to the same group, both rules take place.

How to get an efficient combination of the productive factors

  1. The choice of the best combination of the productive factors can be entrusted to an Advisory Body of business organisation which supplies accurate information on the connection between the work of each category and units of capital in the given sector. This information is quite expensive, but it often determines success or prevents heavy losses.
  2. The price list of the Advisory Body is given inEnclosure 2. The advices can be obtained from the page To play.
  3. How is this information usable? If, for example, you have asked for the relation between the workmen and units of capital in the X sector and the Body has answered that it is 6.7 workmen each 100 units of capital at the moment, provided that you have 500 units of it, the necessary workmen will be 34. The result must be rounded up in order to avoid a proportional fall in the desired output.

Investments

  1. The increase of the durable equipment can be obtained in two different ways:
    • re-investing one's profit into the equity,
    • obtaining long-term loans. In this case an interest is paid according to the Economic Bulletin. Borrowing is limited to twice the owner's capital. But for the part of the loan exceeding the amount of the owner's capital, the lender requires a rate increased of 50% for the greater risk.
  2. Whenever a player inserts into the two fields of durable equipment (in the 'Choice of game' page) an overall value less than the existing net durable equipment value at the end of the previous round, the Eurogame system treats that as a disinvestment and debits the firm in question 50% of every disinvestment for an extraordinary loss for disinvestment (it uses the F.I.F.O. method for this).
    The change of sector is also treated as a complete disinvestment from the sector and the firm is debited 50% of all previous investments that occurred in the previous sector.
    As for the capital units at a firm's disposal, the processes of depreciation and of loss of productivity do not change.

Starting a new enterprise

  1. To start a new business into a given industry, you must invest into durable equipment a minimum amount of capital (s. Advice).
  2. If the player already owns three firms, he is free to decide to change the activity sector of each firm simply by indicating the new sector from the mask in the following round.
    The player's capital and work force can be used again. As mentioned in the previous paragraph, a change of sector causes the firm to be charged an extraordinary cost.
  3. If the player does not own three firms, he can choose the new firm from the mask of the next round, making sure to indicate that it is a new firm. (s. Particular cases)

The Advisory Body

  1. The Advisory Body of business organisation has numerous information at disposal of the player-entrepreneur. They are:
    • C1 - Market survey: the list of the enterprises operating in the required industry is given together with the respective market share.
    • C2 - Business efficiency: it gives a synthetic value in percentage of the firm efficiency.
    • C3 - Capital productivity: it gives the quantity of the output that each unit of capital can supply in a given sector.
    • C4/C5/C6 - Labour-capital ratio: it gives the number of the workers distinguished in categories, necessary at present, every 100 units of capital.
    • C7 - Estimate of the minimum investment necessary to open a new enterprise in a given sector. The group will be charged for it automatically when it was necessary to correct the financing of the durable equipment.
    • C8 - Quantity of intermediate goods and services to be used to obtain one unit of a given good.
    • C9 - Final consumption structure (in value), on GDP 80% on a previous year prices basis.
    • C10 - Gives the amount of the capital the Group can still invest in its business.
    • C11 - The group will be charged for it automatically when the player tries to invest an amount larger than that allowed by the Rule and by its own history.
    • C12 - The group will be charged for it automatically when the personnel is increased without showing the new employed.
    • C13 - History of the investments in a firm of your own (in capital units) and of their loss of productivity.
    • C14 - Price flexibility relative to the difference between demand and supply.
    • C15 - Losses report for disinvestment
  2. Once the player has been authorised to participate, he can choose the type requested from the page To play, after having logged in.
    The charge of costs will be effected on the following profit and loss account of the ordering firm.

How Eurogame works

  1. What happens then? After the enterpreneur-player has sent his choice for the next round by using the 'To play' page, the volume of production of each firm is calculated. It will then be added to the others acting in the same sector, calculating what is demanded to each industry about intermediate goods and services. To these quantities are added those related to the goods and services for consumption, divided into industries, and those related to the business investments, both to replace the old machinery (depreciation) and to increase the possible output. In such a way we get the total quantities demanded by the market (which will appear in the following Economic Bulletin); this demand will be compared with the supplied output, and the surplus will cause corresponding variations to the price in every single market. The economic system is supposed closed. The workers' wage is subject to the same fluctuations, according to the number of the employed existing at the beginning of the game, which we equalled to their supply.
  2. If some industries are non covered, because nobody wants to produce that kind of goods, the economic model EUROGAME supplies some dummy companies producing just what will be demanded owing to the participants' choices.

Before ending the introduction, we would like to name the Nobel Prize winner for economics W. Leontieff, to whose input-output matrix this model owes too much.

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Enclosure 1

School   Town   Country
Name of the group:

Balance sheet after round  ...

Name of your firm ... dealing in the industry ...

Durable equipment and connected financing
Equity12,000,000 €
Employed labour force5,000,000 €
Durable equipment17,000,000 €
Borrowed capital
WorkmenClerks Managers
Advice type 1606016
new employed0 00
those promoted 01
Costs and Revenues Account
Sale revenues    14,415,048
 Cost:  
Goods and services5,493,858  
Labour cost6,260,000  
Advice 0 
Financial charges 250,000 
Depreciation 1,360,000 
Extraordinary costs (disinvestment or change of industry) 0 
TOTAL  13,363,858
Profit or loss 1,051,189
Output obtained in the period: 96,100

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Enclosure 2

COMISMA INSTITUTE
Advisory body of business organisation

Dear Customer,
Our Institute can offer you numerous information important for the player-entrepreneur. They are:

Code Total of workers employed Costs
in €
C1 Market survey 25,000
C2Business efficiency50,000
C3Capital productivity 120,000
C4Workmen-capital ratio180,000
C5 Clerks-capital ratio180,000
C6Managers-capital ratio 180,000
C7Min. investment for a new business50,000
C8 Goods and services to obtain 1 output unit100,000
C9Final consumption structure (in value), on GDP 80% on a previous year prices basis. 80,000
C10 Group capital disposal50,000
C13 Investment report150,000
C14Price flexibility130,000
C15 Losses report for disinvestment100,000

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Enclosure 3

Example of a calculation concerning fixed assets

 HIJKLMNOP
1roundDurable equipment
(in €)
Existing
net durable
equipment
(in €)
Investments Price of 1 capital unitNumber of capital unitsround
ref.
Loss of productivity
(in number of equivalent capital units)
Depreciation
2 n160000000=I2-J2=
16000000
16000=K2/L2=
1000
n0=K2*8%=
1280000
3n+1  =M2*L2-O3*L2*(H3-N3)
=14720000
    n=M2*8%
=80
=P2=1280000
4 n+118000000 =SUM(J3:J3)
=14720000
=I4-J4
=3280000
16400=K4/L4=200n+1 0=K4*8%=262400
5n+2  =M2*L2-O5*L2*(H5-N5)
=13440000
   n=M2*8%
=80
=P3=1280000
6n+2  =M4*L4-O6*L4*(H6-N6)
=3017600
   n+1=M4*8%
=16
=P4=262400
7 n+218500000 =SUM(J5:J6)
=16457600
=I7-J7
=2042400
17020=K7/L7
=120
n+2 0=K7*8%=163392
8n+3  =M2*L2-O8*L2*(H8-N8)
=12160000
   n=M2*8%
=80
 
9n+3  =M4*L4-O9*L4*(H9-N9)
=2755200
   n+1=M4*8%
=16
=P6=262400
10n+3  =M7*L7-O10*L7
*(H10-N10)
=1879008
   n+2=M7*8%
=9.6
=P7=163392
11 n+313024608 =SUM(J8:J10)
=16794208
=I11-J11
= -3769600
      
12n+3    = -MIN(J8,ABS(K11))
= -3769600
=L2*(1-8%
*(H12-N12))
=12160
=K12/L12= -310 n=M12*8%*
(H12-N12)= -74.4
=(M2+M12)*L2
*8%=883200
13n+4  =(M2+M12)*L2-O13
*L2*(H13-N13)
=7507200
   n=(M2+M12)*8%
=55.2
=P12=883200
14n+4  =M4*L4-O14*L4
*(H14-N14)
=2492800
   n+1=M4*8%
=16
=P9=262400
15n+4  =M7*L7-O15*L7
*(H15-N15)
=1715616
   n+2=M7*8%
=9.6
=P10=163392
16 n+40 =SUM(J13:J15)
=11715616
=I16-J16
= -11715616
      
17n+4    = -MIN(J13,ABS(K16))
= -7507200
=L2*(1-8%
*(H17-N17))
=10880
=K17/L17= -690 n=M17*8%*
(H17-N17)= -220.8
=(M2+M12+M17)
*L2*8%=0
18n+4    = -MIN(J14,ABS(K16-K17))
= -2492800
=L4*(1-8%
*(H18-N18))
=12464
=K18/L18= -200 n+1=M18*8%*
(H18-N18)= -48
=(M4+M18)
*L4*8%=0
19n+4    = -MIN(J15,ABS(K16-K17-K18))
= -1715616
=L7*(1-8%
*(H19-N19))
=14296.8
=K19/L19= -120 n+2=M19*8%*
(H19-N19)= -19.2
=(M7+M19)
*L7*8%=0
20       =SUM(M2:M19)=0  =SUM(O2:O19)=0 
21     number of equivalent capital units 100% efficient=M20-O20)=0    

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