| XP123 → Games → Electric Apple Market |
William C. Wake, William.Wake@acm.org
Copyright 2001, William. C. Wake. All rights reserved.
Goal: This is a simulation of deregulation in the electricity industry.
The apple pie market has historically been a highly regulated industry, but it’s undergoing deregulation rather rapidly.
Until recently, pie apples all came from the Appleseed Farm Elite corporation (ticker: APFEL). The Pie Apple Regulatory Commission (PARC) has full authority to set rates for apples and to structure the market.
Under deregulation, an upstart has entered the market: Apples 2 Extremes (ticker: AXX) hopes to make a killing through its agile approach. It has encouraged the belief that competition will soon lower the price of pies, and consumers everywhere love that idea.
Trees: Trees are expensive but have a long lifetime. (They are typically bought through bonds or stock sales; in effect a farm pays a monthly "mortgage” per tree.) To get apples, a farmer buys and applies a quantity of water, and gets a proportional number of apples the next day. An unwatered tree "hibernates”; the tree still must be paid for, but no water need be bought (and of course you get no apples from it).
Pie apples: Pie apples are more sensitive than traditional apples. The big problem is that they can’t be stored: they have to be used the day they’re produced, or they’re too mealy for use. Pie makers won’t accept day-old apples.
Farmers: Apple farmers are in it for the money. Different farms may balance current expenses and future income differently. They don't like to cause shortages, but they can’t afford to ensure that shortages could never happen. Farmers may not legally collude.
Pie Makers: The consumers of pie apples are not pie eaters directly, but rather the pie makers. This industry demands a certain number of apples each day. The number is based on things such as the price of apples, the pie business cycle, and random factors. Pie makers value reliability and price. Reliability is that they have as many apples as they need each day. (They don’t care if some are wasted, as long as there are no shortages.) Shortages take two forms: brownouts, when pies get less than the optimal amount of apples, and blackouts, when pies burn because of major shortages.
PARC: The Pie Apple Regulatory Commission has a tough job. They try to fairly balance the needs of consumers and producers. The PARC can set prices for apples; they define rules about which apples get sold and how income is distributed among producers. The commission wants to keep both farmers and pie makers happy.
Apples <=> Electricity
APFEL <=> Regulated utility. Typically has a longer-term view but wants more certainty.
AXX <=> Historically "unregulated" utility (typically new in the business). Short-term view, accepts uncertainty.
PARC <=> Regulators
Pie Maker <=> Consumer (or e.g., distribution or transmission)
Cost: tree cost for each tree owned + watering cost for each tree watered
Groups can petition PARC at any time, but it can change rules only at the end of each cycle.
PARC has historically used these rules:
Trees: Trees cost $10K. Water for one tree: $100/day. Production: 100 apples/tree/day. A tree must be watered for a week before it will start producing. Typically, only one new tree a week is permitted. APFEL starts with 35 trees, AXX with 5.
Demand: There is a daily demand curve for power (in 100s of apples). (Pie makers are civilized, and don’t work on weekends.)
M: 5, T: 30, W: 20, H: 35, F: 10
Add 2d6 to this to get actual demand.
The facilitator can adjust the demand curve. PARC actions may change it too. (For example, lowering the price will increase demand; differential pricing might smooth it out.)
Apple distribution (pipeline): APFEL is guaranteed able to sell up to 2500 apples/day. AXX is guaranteed the next 1000 apples/day (if needed). They split equally any sales above 3500.
Apple cost: Apples cost $1 each.
Income distribution: Proportional to apples sold. So if demand is 4000, APFEL produces 3000 and AXX produces 2000, then APFEL gets $2500+250=$2750, and AXX gets $1000+250=$1250.
Shortages:
(Note that PARC can’t change the rule about what happens to them, but they can change how they "pass along the pain.")
Pie makers are willing to accept one brownout every couple weeks. If it gets worse than this, they’re more vocal. They can even go so far as to try to get the PARC fired.
The PARC group can decide what rules they want. (They aren’t restricted to these ideas.)
Inputs and outputs: They can change the cost of trees, water, or apples.
Pipeline access: They can change how apple distribution is handled.
Income distribution:
Multiple Power Types: Model with different types of trees. For example, you could have a "super-tree" that costs much more but doesn’t have to be watered, in analogy to a nuclear power plant.
Environmentalists: They value safe farming. Model this by having two classes of trees. Normal trees have a lower price but a higher chance of being stymied by environmentalists. Green trees have a higher price and less chance of being blocked. (Let it take several turns to buy a tree, and roll dice to decide if they’re blocked.)
End Consumers: Model by having people who purchase and eat pies. You can build up the whole chain: Farm => Pie Maker => Store => Purchaser => Eater. (This is analogous to the chain of suppliers, distribution, and consumption in the power industry.)
Commodity Brokers: You can introduce a spot market or commodity market. Brokers value margin and volatility.
Future Market: You can introduce a futures market, e.g., for selling pipeline slots. (A grid of cells can represent slots for each day in the week.)
Status: This game has not been played or tuned yet.
Source:
(William C. Wake.)