Deepwater: A Computer-based Business Ethics Competitive Simulation Game

by
Wayne F. Buck
Assistant Professor of Business Ethics
Eastern Connecticut State University
This version: July 11, 2012

Abstract
This article explores the use and limitations of simulation games in the teaching of business
ethics. This exploration consists of presenting two fundamental objections to using business
ethics simulation games to teach business ethics. These objections appear to have not been
previously articulated in the business ethics literature. Then I describe a competitive business
ethics simulation game that I developed based on the 2012 BP Gulf oil spill and present some
results from using this simulation in an undergraduate business ethics course over the past
year and a half.

Key words: business ethics, simulation games, teaching business ethics, BP oil spill

Contact:
buckw@easternct.edu
(860) 465-0107

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I teach an upper level business ethics course at Eastern Connecticut State University.
Course prerequisites include accounting, finance, marketing, operations management,
business information systems and business law. Requirements include a 15 page
argumentative research paper analyzing the ethical behavior of managers and employees
responsible for a business related event that caused significant harm. Typical topics include
oil refinery explosions, coal mine collapses, airplane crashes, and financial disasters such as
the collapse of Lehman Brothers or Countrywide. Other course requirements include three
written case studies, in-class quizzes and several short reflection essays.

WHAT IS A "SIMULATION"?
For the purposes of this article, I will use the word "simulation" in a very specific
sense:
The word "simulation" designates a process or event (and hence might be more
precisely termed a "simulation event") wherein a symbolic model of some distinct
(usually real) system is used to replicate the behavior of the modeled system.
The essential components of a simulation are hence (a) some target system (usually
but not necessarily a real system such as physical process or organization), (b) which is
represented symbolically in a model, and (c) that model is utilized for the purposes of
replicating the behavior of the target system. Simulation models often, but need not, consist
of equations and algorithms instantiated in a computer program. Note that this definition does
not specify the purpose of the simulation, or why or how the symbolic model is used. This is
because simulations can be used in many contexts for a wide variety of purposes.
In the context of teaching business ethics, simulations in this sense are to be
distinguished from cases, enactments and games. Cases present information to students about
some real or fictional situation and ask them to think through and discuss the issues arising in
the case, and then to make recommendations about what decisions should have been made or

Deepwater: A Business Ethics Simulation Game | 2

to decide what they would do in that same situation. During these case discussions, students
may adopt a third person point of view ("this is what the people described in the case should
have done" or "here is what they should do") or a first person point of view ("in this situation,
here is what I would have done" or "here is what I have decided to do").
I distinguish between cases (whether first or third person point of view) and
enactments. Enactments are staged social interactions that incorporate significant fictional or
pretend elements including specific roles for participants. The fictional elements might
include scene, time, circumstances and the characters acted out by the participants. When
used for education, training and skill building purposes, enactments are usually unscripted,
improvisational dramas in which the individual participants have been assigned specific roles
(characters). Regardless of how specific, detailed and "realistic" the setting or characters may
be, these enactments are not (in my technical sense of the word), genuine simulations.
Games are notoriously diverse and resist formal definition. Some games make no
attempt, in any sense, to either represent or model anything and hence are not simulations.
Examples of non-representational games are poker or chess. Other games do utilize
representations. Monopoly is an example of a game with highly simplified and abstract
representational elements. The massive multiplayer online game, World of Warcraft, is an
example of a game utilizing more complex representations. Neither of these games is,
however, a simulation, since no system is being modeled. In each case, the game is the
system.
By themselves, neither simulation events nor enactments are games. Each requires the
addition of other elements in order to function as an element in a game. These additional
elements typically include: rule-governed social interactions between multiple players
involving turn-taking or multiple rounds of play, scoring, and competition. Hence, while

Deepwater: A Business Ethics Simulation Game | 3

simulations and enactments can be used in games, not every simulation and not every
enactment is a game, and not every game involves the use of a simulation or an enactment.

THE PROMISE OF SIMULATIONS FOR TEACHING BUSINESS ETHICS

Simulations are widely used in business courses to teach marketing, strategy,
operations and management (Faria, Hutchinson, Wellington, & Gold, 2009) and there are
many management simulation products on the market.
The use of simulations to teach business ethics appears to be less common, and fewer
commercial ethics simulations are commercially available. Many so-called business ethics
simulations are in fact role-playing exercises, case studies or aids to discussion and reflection,
and do not involve simulations in my sense of the term, further reducing the number of true
business ethics simulations on the market. For example, "Turning Gears," one of the business
"simulations" available from Ethics-LX (www.ethics-lx.com), is not actually a simulation at
all, but rather an online case discussion tool about specific fictional business ethics dilemmas
that provides students with automated stakeholder feed-back. Another example, The "Core
Values Team Simulation" game sold by Ethics Game (www.ethicsgame.com), is again not
actually a simulation, but a series of cases with a mechanism to score students' decisions.
A genuine business ethics simulation needs to utilize a symbolic model of an
organization, industry or market in an effort to (a) confront students with business decisions
that involve making trade-offs between profit and observing ethical norms and (b) replicate
the consequences of those decisions.
Only one genuine business ethics simulation game has come to my attention: "Capsim
with Ethics Plug-in" by Capsim (www.capsim.com).

Deepwater: A Business Ethics Simulation Game | 4

The dearth of genuine business ethics-focused simulation games is unfortunate,
because there are several reasons for believing that simulations could play an important role
in teaching business ethics.
Consider the Gulf oil spill. In April, 2010, the crew of BP's Deepwater Horizon
offshore oil rig, floating in 5,000 feet of water fifty miles offshore, lost control of the well
they had drilled through 13,000 feet of rock. Critical backup control systems primarily the
blowout preventer failed. Crude oil and natural gas surged up out of the well onto the rig
and exploded, killing eleven and injuring many more. Over 200 million gallons of crude oil
flowed into the Gulf during the three months it took to cap the well, creating the worst
environmental disaster in U.S. history and damaging the Gulf economy at a cost of billions of
dollars (Graham, et al, 2011).
An official investigation has determined that management errors were the root cause
of the disaster (Bartlit, et. al., 2011). Unethical behavior likely played an important role in
causing the disaster. Although the chain of actions, decisions and events leading up to the
disaster is now reasonably clear, we are left wondering: How could it have happened? What
should have been done to prevent the unethical behavior in the first place? What can be done
to prevent such accidents in the future?
One common assumption is that executives, managers and employees with stronger
moral compasses might have made a difference. Had the people involved been more aware of
the relevant ethical issues, possessed of a richer moral imagination, or more practiced at
voicing ethical concerns, the disaster would have been mitigated or even avoided altogether.
This diagnosis in turn suggests a strategy for reducing the number of future moral failures:
business departments should do a better job of teaching business ethics and nurturing moral
perception, moral imagination and moral voicing.

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Yet class lectures, case studies and group projects can only go so far in nurturing
ethical business behavior. Teaching methods that ask students to reflect back on specific
ethical failures are handicapped by a psychological phenomenon known as hindsight bias.
After an event has occurred, and with the luxury of time and more information, what
happened and why is often so clear that it is hard to understand how the participants could
not, or did not, see it coming. It is hard to shake the suspicion that they must have known
what was about to happen and nonetheless forged ahead driven by such unseemly motives as
profit or career advancement in other words, hindsight has a built in bias to seeing behavior
as unethical.
In hindsight, it is all too easy to substitute a simplified representation for the actual
reality and fail to appreciate the information gaps, vital concerns, issues and pressures faced
by participants. Even when such concerns are evident such as profit in retrospect it is very
difficult to feel their urgency the way participants did. And unless students have felt those
pressures, how can they be prepared to resist them?
Another challenge faced by participants in an organization headed toward an ethical
precipice is that most of the time indeed, nearly all the time nothing bad happens. This is
true of industrial accidents as well as business moral failures. People go to work, day after
day, constantly making the reasonable adjustments and accommodations necessary to meet
the practical challenges of "getting the job" done and, in the vast majority of cases, the
problem is solved, there is no crisis, and everything continues as before. Most of the time,
Shuttle launches go just fine. Most of the time, engineers weigh the pros and cons of various
additional tests, improvements, enhanced safety procedures and their decisions turn out to be
just fine even when those decisions are to skip the additional tests, forego the improvements
or leave the existing (antiquated) safety procedures in place.

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Unless business ethics students are able to experience what it is like to participate in
an organization approaching a point of moral crisis, it will be nearly impossible for them to
recognize an impending disaster and prevent it. Textbook readings, cases and class discussion
are incapable of giving students an understanding of what it is like how it looks, tastes,
smells and feels to be caught up in a business process headed toward a moral crossroads.
And without such experiences, business students will leave our classrooms and our programs
ill-equipped to do the right thing when called upon to do so.
Even worse, reliance on lectures, texts and business cases might actually increase the
likelihood of unethical behavior. Because of hindsight bias, students may leave the classroom
with a false and dangerous expectation that it will be obvious when things are about to go
wrong and what the right course of action is. Isn't it obvious, for example, that the Deepwater
Horizon's blowout preventer should have been serviced on the required schedule, and that it
was wrong to ignore test results that indicated a poor cement job?
Experiential learning methods seem to have the potential to compensate for the
weaknesses (and dangers) of traditional classroom techniques. Hence the question that
motivates this paper: Can competitive business simulation games be an effective tool in the
teaching of business ethics?
Simulation games have the potential to immerse students in the complexities,
uncertainties and ambiguities of decision-making in the midst of morally perilous business
activities. A simulation might better prepare students to handle the ethical complexities of
business decision-making and sharpen their perception of ethical risk.
For example, college students often believe that either deciding what is right and
wrong is easy or that there is no right or wrong answer (that "it's up to the individual").
Suitably constructed simulation games might challenge this complacency and show students
that while relativism is false that does not mean that it is easy to decide what is right and

Deepwater: A Business Ethics Simulation Game | 7

wrong much less that it is easy to actually act ethically. Simulation games might, in other
words, awake and nurture students' moral imagination and moral resolve.
Finally, young people are often unprepared for what we might call moral misfortune.
It rains on the just and the unjust alike says the Bible (Matthew 5:45). Even if a business
person does everything right, obeys all the laws and is highly scrupulous, she may still lose to
a competitor who breaks the law and commits numerous moral transgressions. She herself
may be falsely accused of impropriety or caught and harshly punished for the mildest of
transgressions while he gets away with murder. A simulation, particularly one in which
outcomes are determined probabilistically, might help students learn this hard but important
lesson.

TWO ARGUMENTS AGAINST BUSINESS ETHICS SIMULATIONS

Despite the considerable promise of business simulation games, there are two
fundamental reasons for suspecting that business ethics simulation games may not be
effective. Both of these arguments are rooted in the role grades play in the classroom.
The First Argument: No Real Unethical Choices
The first argument arises from the fact that while winning business simulation games
has genuine and real benefits for students (a higher grade), in pursuing those benefits students
are not and cannot be given genuine opportunities to engage in actual unethical behavior.
For example, in their excellent paper, Schumann, Anderson & Scott (1997) present an
example of an ethical dilemma one might incorporate into a simulation game: a player must
choose between fixing a safety problem or bribing the safety inspector. The cost of fixing the
problem is six times the cost of bribing the inspector (pp. 175-177). A student who decides to
do the "right" thing by fixing the problem significantly harms her simulation profits, lowering
her grade in the course. What about the student who decides to bribe the inspector? The fact

Deepwater: A Business Ethics Simulation Game | 8

is that this student does not, and cannot, actually make a bribe. There is no actual inspector,
and no money actually changes hands, so no actual unethical behavior can occur. The
"unscrupulous" student merely pretends to bribe, and pretending to bribe (particularly when
everyone one involved knows there is no actual bribe) is not unethical.
Students playing the Schumann, Anderson & Scott simulation game in fact face no
genuine moral dilemma when confronted with a choice between actually harming themselves,
on the one hand, and simply pretending to engage in some unethical action, on the other.
Given these alternatives, deciding to the do the "right" thing would in reality be nothing more
than a gratuitous act of self-inflicted harm. (Perhaps this aspect of business simulations is
what accounts for the fact that students often seem to suspend moral reasoning when playing
simulation games [Reall, Bailey & Stoll, 1998].) The philosopher John Searle has pointed out
that simulated weather is not weather (Searle, 1990); likewise, a simulated ethical dilemma is
not an ethical dilemma.
A simulation game that presents students only with imaginary moral dilemmas and
opportunities to pretend to act unethically cannot create the experience of facing a true moral
dilemma, and hence from the student's perspective the ethical lesson taught by the simulation
remains, at best, at the level of theory and abstract principle.
Just as a strategy simulation can be effective only because it gives students an
opportunity to strategically "screw up" a competitive simulation game can only be effective
as an experiential tool for teaching business ethics if it presents students with genuine, not
pretend, opportunities to behave unethically. Moreover, an opportunity to act unethically is
genuine only if students know they can "get away with it" or, if they are discovered, know
they will not punished. A business ethics simulation game must present students with genuine
moral dilemmas, and this means genuine opportunities to act unethically (not just pretend to

Deepwater: A Business Ethics Simulation Game | 9

act unethically) in pursuit of profit or to act ethically (not just pretend to act ethically) and
thereby forego profits, risking a lower course grade.
One way to solve this problem would be to change the game so that the modeled (i.e.,
imaginary) injuries trigger real harm to others. However, merely causing harm to others is not
enough. Players of competitive games harm others as a matter of course by playing better and
winning, depriving their competitors of the benefits of victory. But this kind of harm is
perfectly just and not unethical to inflict on others. Hence the imaginary harms in an ethics
simulation game must trigger real and unjust harms to others. Just as imaginary profits
deliver real benefits to the player, imaginary injuries must cause actual unjust harm to others.
But which others? The only others available to be harmed are the other students
playing the simulation game. What kinds of harm are possible in the classroom context? I can
only think of two: imposing additional course work on a student or reducing her grade. For
example, the Deepwater simulation rules could be changed so that every time a player "kills"
a worker, some other student in the class, selected at random, is required to complete an
additional assignment or loses points that would otherwise count toward her overall course
grade.
Such a rule would indeed confront Deepwater players with a genuine moral dilemma:
either reduce spending on safety, increasing profits and risking unjustly harming a fellow
student, or increase spending on safety, reducing their own profits in the interest of protecting
their fellow students.
Here is the difficulty: How can it be fair to penalize a completely innocent student
because another student acts selfishly? This proposed new rule, which attempts to overcome
the problem that students face only fake moral dilemmas in classroom simulations, has the
following consequence: grades for students who maintain their ethical standards would be
unjustly reduced, and grades for those who act selfishly would be unfairly increased. The

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very purpose of the grading system would be undermined and indeed perverted. In effect,
students would be rewarded for cheating and punished for not cheating and this would
certainly be an unethical result! Hence a paradox: only unethical business ethics simulations
can effectively teach business ethics.
The Second Argument: Rewarding Ethical Choices
In the typical business simulation, students manage simulated companies, competing
against each other for profits. The premise of these competitive games is that students who
learn the most will do a better job of applying business concepts, will tend to more profitable
and hence to get higher grades.
Consider a business ethics simulation developed from an existing competitive
business simulation game as suggested by Schumann, Anderson & Scott (1997) by adding in
various opportunities to increase profits unethically: for example, to pollute, to pay a bribe, to
market a defective product, or to broadcast a misleading advertisement. Now, although
sometimes the ethically right decision is also the most profitable decision, genuine business
ethical dilemmas arise only when a manager has to choose: do the right thing and sacrifice
profits, or do the wrong thing and increase profits.
At the close of competition in the ethics simulation described above, it is likely that
some of the more profitable players will have gained their profits unethically; and some of
the less profitable players will have given up profits to act ethically. All in all, in a
competitive simulation game with ethical dilemmas, it is likely that the students who do a
better job learning and applying ethical concepts will be, all other things being equal, less
profitable than those students who ignore ethical principles and focus solely on the bottom
line.
At this point an ethical dilemma arises for the instructor, who must decide how to
award grades in the face of this reality. She has two choices: award grades on the same basis

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as for other business simulation games (i.e., solely on the basis of business outcomes such as
profitability), or award grades taking into account how well players adhered to ethical
principles. The first option rewards unethical behavior, while the second tends to confound
doing the right thing with doing the prudent thing and it is precisely the conflict between
the two we want students to appreciate (hopefully with the result that they chose the good
over the goods).
This second argument for doubting the value of business ethics simulations points out
that in assigning grades based on simulation results, instructors face a dilemma: either punish
ethical behavior, thereby treating those who did the right thing unjustly, or reward students
for acting ethically, thereby teaching the wrong lesson about ethics.
Notice that taking the first horn of this dilemma is undesirable for reasons of
principle: it is wrong to reward unethical behavior. On the other hand, taking the second horn
of the dilemma is undesirable because of the expected empirical consequences of rewarding
students for acting ethically. In other words, the force of the 2nd Argument depends on the
following empirical hypothesis being true:
Business students who are rewarded for making good ethical decisions will be less
likely to spot conflicts between pursuing profit and ethics, less attuned to ethical
dilemmas in business and more likely to make decisions based purely on profit
implications.
This seems a reasonable hypothesis, but ultimately the validity and pedagogical
implications of the 2nd argument depend on verifying it.

AN EXPERIMENT: THE DEEPWATER SIMULATION

The concerns described above emerged as I developed my own business ethics
simulation, which was inspired by the April 2010 explosion of BP's Deepwater Horizon oil
rig and subsequent Gulf spill. "Deepwater" is a computer-based business ethics simulation

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game designed to immerse students in an ethically complicated business situation. It was not
intended to model the events on the Deepwater Horizon oil rig or replicate the experiences of
BP management and rig workers. It presents students with a very specific ethical challenge:
how to manage the trade-off between profit on the one hand and safety and environmental
protection on the other. Fundamentally, the question Deepwater players face is how much
risk are they willing to expose others to in pursuit of their own interests?
Students manage an oil exploration and production company operating in deep water
in the Gulf of Mexico. They compete against each other to maximize profits and earn extra
credit that has the potential to significantly increase their course grades. Approximately 175
students have played the simulation in three somewhat different versions.
Deepwater is a semester-long game, consisting of three practice rounds and twentytwo regular rounds of play nearly one round each class period. For each round, students
make decisions about how to operate their oil rig and enter those decisions online. These
decisions include how much crude oil to produce and how much to spend on maintenance, on
safety programs, on lobbying regulators and on funding political campaigns. The crude oil is
sold on the open market. Actual market prices are used to calculate revenues. In the
simulation, players are exposed to the typical risks of offshore oil drilling: accidents that
injure or kill workers, and well blowouts with the potential to spill thousands of barrels of
crude oil into the Gulf.
Unlike most business simulations, Deepwater does not model product demand,
company sales or changes in market share. In fact, Deepwater assumes that players are able
to sell every drop of oil they produce and that every player receives the same market rate. The
simulation engine, implemented in Excel, calculates revenues and expenses based on players'
operating decisions, and outputs operating, financial and market reports for each player. The
operating report includes metrics such as equipment condition, actual and forecast weather,

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current crude oil prices, and the number of worker fatalities and injuries. The financial report
includes an income statement and balance sheet. The market report ranks competitors by
profitability (see Exhibits A, B and C).
The central function of the Deepwater simulation engine, however, is modeling oil
well blowouts, worker accidents and government safety inspections. Using custom
probability functions, Deepwater "rolls the dice" each round to determine which players (if
any) experience a blowout, an accident, or are cited and fined for a safety violation.
Unlike many business simulations, key algorithms of the engine are not deterministic,
but instead probabilistic. This is a unique and distinctive aspect of Deepwater, and is one
reason why I believe it is particularly appropriate for teaching business ethics.
A player's operating decisions do not completely determine whether she is cited for a
safety violation, experiences an accident or suffers a blowout. Rather her decisions about how
much oil to produce and how much to spend on equipment maintenance and safety affect the
probability of something going wrong. Producing more oil or spending less on maintenance
and safety increases that probability, while producing less oil or spending more decreases that
probability. These probabilities never decrease to zero and never increase to 100%.
As in real life, it is possible for a player to produce the right amount of oil, spend the
right amount on maintenance and safety, and still have an accident or blowout unlikely, but
possible. On the other hand, it is possible for a player to work her equipment and crew until
they are ragged, skimp on maintenance and safety, and have no accidents and not blowout
unlikely, but possible.
Players also run the risk of going bankrupt. They begin the simulation with cash in the
bank and an outstanding bank loan. If a player runs out of cash, she goes bankrupt. She has
two rounds to line up financing from a bank to get back to a cash positive position. Otherwise
she is eliminated from the simulation.

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The availability of credit in the simulation is particularly important because players
have the opportunity to acquire additional oil rigs. New oil rigs come on the market and are
available for purchase at auction. These oil rigs are quite expensive, requiring significant
capital to acquire. The benefits in terms of profitability of owning more than one oil rig are
considerable, however. Students are also allowed to merge their companies.
Students managing oil companies can lobby regulators and politicians. About halfway through the simulation, the five students who have spent the most on lobbying are
appointed to an Industry Review Board. This board has the power to change many of the
simulation's rules, including fine schedules, the frequency of safety inspections, and when
rigs are required to suspend production or "shut in." There is no requirement that the new
rules established by the Industry Review Board be fair. (This component of the simulation
mimics some of the aspects of the game Star Power.)

PEDAGOGICAL OBJECTIVES OF DEEPWATER

Deepwater was designed for use in a business ethics course with the following
learning objectives in mind:

Develop a deeper appreciation of business ethics issues by experiencing the

challenge of running a business in a complex and morally ambiguous
environment.

Strengthen the ability to recognize and articulate ethical dilemmas in a

business context by experiencing the conflict in a competitive situation
between profit-seeking activity and moral values.

Awaken recognition of the reality that business decision making including

ethical decision making is always an exercise in managing probable

Deepwater: A Business Ethics Simulation Game | 15

outcomes, and hence that not only does it rain on the just and unjust alike, but
also that the sun shines on the just and unjust alike.

Enhance the ability to recognize the effects of one's actions on others and
increase one's capacity to appreciate and value the well-being of others by
experiencing what it's like to be treated unfairly, and what it's like to treat
others unfairly.

Foster a sense of caution and humility in assigning moral blame to individuals

involved in harmful but complicated, confusing and uncertain events by
experiencing the simplifying and distorting effects of hindsight bias.

Many aspects of the simulation and its implementation in class promote these learning
outcomes. In the world of the Deepwater simulation:

Stakes are high. Doing well in the simulation is not a requirement of the
course, and a student's grade is not reduced if they do not do well. However,
students can earn enough extra credit to boost their class grade one entire letter
grade (from, for example, a "B" to an "A"). The size of the potential extra
credit, and the possibility of losing that opportunity, is enough to give many
students an emotional stake in the outcome.

Profit is the only measure of success. Total profit is the only measure used to
award extra credit at the end of the simulation. Students are informed about
the worker injuries and deaths they've caused, but those events have an impact
on business profitability only because of the associated fines.

Decisions are made under uncertainty. There are external uncertainties (e.g.,
the price of crude oil, Gulf weather) and internal uncertainties (e.g., blowouts,
bankruptcies, the actions of the Industry Review Board) which generate in

Deepwater: A Business Ethics Simulation Game | 16

students an experience of having to decide "in the dark" without sufficient
information.

Outcomes are probabilistic. The simulation replicates the reality that, given the
limitations of information gathering systems, human cognition and scientific
and engineering knowledge, for all practical purposes decision makers can
only change the probability of desired outcomes, not guarantee them.

Time is of the essence. There is a simulation round nearly every class period.
Students who miss the deadline for entering their management decisions are
"shut in" that round, gaining no revenue while still incurring considerable
operating expenses. Students are provided with information-rich reports of
their results and their company's financial condition after each round. They
need to absorb and analyze this information quickly, because for half of the
rounds they have only 36 hours to make decisions for the next round. In the
context of the workload for my ethics course, and because most students take
five courses per semester, students often feel overwhelmed by the demands of
the simulation and feel pressure to just make a decision for the next round, any
decision, so as not to be shut in for that round.

Ethical Tradeoffs in Deepwater

The Deepwater simulation does not confront students with explicit ethical dilemmas.
Students are not forced to choose between bribing an inspector or an expensive repair,
between lying about a product or losing market share, between fraudulent accounting or a
falling stock price. Rather students are forced to confront the challenge of making appropriate
ethical tradeoffs between profits and other values such as safety and the environment
something every manager needs to do.

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Bounded Rationality
Students also learn how hard it is to "get it right." As mentioned above, the simulation
is deliberately complex and rife with unknowns, and students have inadequate resources to
make optimal decisions. Nearly every class period players must make operating and financial
decisions on top of the required work for the course, a full course load (for most students)
and a job (for some). The user manual is long, comprehensive and largely unread. The
reports delivered to students are packed with detailed critical information which most
students don't even begin to use. The simulation rules give students considerable flexibility in
how to play the game yet few students think outside the box to develop a superior strategy.
In other words, the simulation is like many, if not most, real life situations in which
business decisions need to be made.
Justice and Injustice in Deepwater
One of the most important ethical aspects of Deepwater was inspired by Star Power, a
game developed in the nineteen-sixties by Gary Shirts as an experiential exercise in the use
and abuse of power. Star Power is extensively used in schools, workplaces and leadership
training programs to improve participants' understanding of the dynamics of power in
organizations.
In the game, players are divided into three groups, the Squares, the Circles and the
Triangles, each representing a different social level. Players trade tokens of value as a way to
improve their position in the game society. After a certain period of time, those players who
occupy the top social level ostensibly because they have been the most successful at trading
have the opportunity to change the rules of the game. Typically, they change the rules of
the game to secure their power. In the face of what they perceive to be injustice, the other two
groups either fight amongst themselves for the favor of those in power, or revolt and gang up
against the top group. The frustration of the lowest group sometimes manifests itself through

Deepwater: A Business Ethics Simulation Game | 18

verbal and sometimes even physical violence (Pittenger, 1999, p. 222; Feld, 1997, pp. 108110).
The Deepwater simulation game includes a key aspect of Star Power: half way
through the simulation, the five students that have spent the most on lobbying are given seats
on the "Industry Review Board" (IRB). This board has the power to change many of the rules
of the simulation.
The IRB replicates the reality that businesses, particularly the largest and richest
businesses, have a disproportionate influence on the laws, regulations and people that govern
an industry. The IRB provides an opportunity for students to experience how being in power
affects one's perspective, attitudes and values, and also to experience what it is like to be
treated unjustly.

STUDENT REACTIONS TO DEEPWATER

A survey of students conducted after the sixth round in the Spring 2012 semester (the
third iteration of the simulation) revealed that:

63% of students felt very or moderately engaged with the simulation; only 9%
felt very or rather disengaged

87% said they had a good understanding of the rules of the simulation, and
76% said they had a good understanding of how to make simulation decisions

54% felt they were very good or good players; only 9% felt they were poor or
very poor players

25% said they had learned a lot about managing a business, 61% said they had
learned something about managing a business, for a total of 86% who had a
positive learning experience

Student reactions to the simulation have been largely positive. For example:

Deepwater: A Business Ethics Simulation Game | 19

I loved this simulation. I thought it was a great project to teach us ethics and
responsibility. I was always excited to come to class and see where my rig ranked and
was always hoping that my rig didnt blowout. I was put in many situations where I
found myself thinking about what to do, be ethical or make money. Sometimes I think
that I was a little unethical mostly towards the end when increasing the rigs profits
was crucial to stay in the game and earn the extra points onto our final grade. This
was a great project and I learned a lot about being ethical when you are running a
business.
There were a few negative reactions as well:
To me I am going to be honest that I did not get much out of the simulation. I tried but
it did not work out as much as I would have liked.
But if you really want my opinion I suggest scrapping the entire simulation. I dont
understand how its related to business ethics.
Achievement of Learning Outcomes
A number of student comments suggest that, at least to some degree, the simulation
achieved its learning objectives. For example, the following student quote addresses the
objective of developing a deeper appreciation of moral ambiguity and complexity:
People think there is good or evil with no in-between- but this exercise puts us in that
in-between position. We can see how managers make decisions to benefit themselves
(because we might make decisions to benefit our grade while we are producing way
too much oil and injuring employees or blowing out) and why they make these
decisions.
An enhanced appreciation for hindsight bias was also evident:
Sometimes you can't understand why a certain person made that bad decision until
you are that person.
A number of students complained about the simulation workload, indicating that the
design objective of mimicking the hectic and pressured nature of managerial jobs was
achieved:

Deepwater: A Business Ethics Simulation Game | 20

I don't like the fact that it is for every class. Once a week would suffice. Also, it may
not seem like it takes much time to you, but as a student who is employed full time and
taking 3 other classes this simulation just adds to the huge workload of the class. It
actually becomes a burden at times.
Another student recognized the benefits of being overwhelmed:
In my view the best aspect of the simulation is how you have to be on top of your
game to be able to be in the top 10%. You have to be a real "manager" and make sure
you get your numbers in on time and be organized so that you are able to make
money.
A number of students commented on the apparent "randomness" of the outcomes.
They had trouble accepting the probabilistic nature of outcomes and complained about the
unpredictability of simulation results:
Another thing that I don't like is the randomness of it all. You can do everything right
and have people die, safety violation fines, and even blowouts. This makes it unfair
that only the top %'s get extra points.
Unfortunately, instead of gaining an appreciation of the inevitable uncertainty of decisionmaking and the role of chance, students tended to direct their frustration at the simulation
design:
The worst aspect about the simulation is how random all the outcomes are. Some
people could spend way more than the baseline for the maintenance and safety
expenses and still kill someone or get blown out. The way to make the simulation
better is to look at how much everyone is spending and decide whether people get
fined or blown out based more on their decisions and less on luck.
Some of this frustration might be due to a failure to adequately understand the nature of
probability, but that cannot be the entire story.
The attempt to give students a sense of what it feels like to act unjustly or be treated
unjustly was largely a failure. I had hoped that the worries expressed by this student would in
fact be realized:

Deepwater: A Business Ethics Simulation Game | 21

There is also the part that as soon as someone becomes part of the IRB they
automatically become power hungry politicians that attempt to underhand everyone
else in the simulation.
In fact, those worriers were not realized.
In that first implementation of the Industry Review Board, students were appointed to
the board based on profitability. Unfortunately, the student who wound up as chair of the
board was singularly passive and failed to take any action to organize the board to change any
simulation rules. In response to a question about his inaction, the student replied:
I just don't want to change the game. . . I say keep it the same. I have been in the top
10 and I like where I stand, so why would I want to change it?
Without an active board chair, the other students on the IRB took the opportunity to
do nothing. This came as a tremendous relief to many of the other students, who had been
quite worried about what the Board would do. For example:
I don't think it is a good idea to allow the rules to be changed by the few most
profitable students. Although they are the most profitable this doesn't mean they are
the ones who make the best decisions, especially when controlling everyone else.
One student had a particularly insightful comment on this approach to assigning board
membership:
The fact that the most profitable students will be on the board is a worse idea because
they most likely spent the least on safety and maintenance throughout the rounds to
get the edge
In an attempt to fix these problems, I made some changes for Spring 2012:
1. Membership on the IRB was determined by how much the student spent on
lobbying, not on profitability. That way, only students who understand the role
of the board and want to exercise its powers would become member.

Deepwater: A Business Ethics Simulation Game | 22

2. Immediately upon being formed, the board was confronted with several
proposed new and quite onerous "pending" regulations that would go into
effect unless the Board acted quickly to modify or veto them.
This second implementation of the IRB was somewhat more successful, but
nonetheless still a disappointment. The board did indeed rule on the pending legislation, but
surprisingly agreed to pass provisions that dramatically increased the fines for accidents and
safety infractions. The board could have easily decided not to authorize these increases in
costs which would fall on all players, including themselves but instead approved them.
At first glance, the rationale given by one member of the IRB for his decision to
increase fines is heartening:
We decided to raise the fees on all the fines to keep people honest. The fines are in
place to protect the workers. They are the ones doing all the heavy lifting and reaping
almost none of the rewards. It was too easy to put people in harm and ignore safety
with the cheaper fines. We wanted to help ensure people made VERY good decisions
concerning the safety of their rigs. We wanted to take the risk off the workers and put
it back on the owner where it belongs.
Comments by other members of the IRB reveal that not everyone accepted this reasoning:
I did not approve these new fines with my vote. I voted against the new fines because
I thought they were unnecessary and they were making the fines way to extreme. I
voted against these fines because I did not think it was going to benefit everyone
doing the simulation equally. The reason people voted for this to be approved was
because they were already in the lead of the median for them to raise their grade from
the simulation.
Yet both students argued their positions on the basis of fairness: one thought it would be fair
to the workers to raise the fines, the other thought it would be unfair to companies with lower
revenues.

Deepwater: A Business Ethics Simulation Game | 23

Most surprisingly, the board took no action to modify the simulation in any other way.
In particular, students on the board made no effort to pass rules that would have easily
solidified their own standings and virtually guaranteed a significant boost in their course
grades.
Again, we might be heartened by this inaction, since it suggests that the students acted
on the basis of moral principle rather than out of naked self-interest. Given how Star Power
exercises typically unfold, and given my familiarity with undergraduate business students,
I'm skeptical of this explanation, however. At the very least, I would have expected a
vigorous internal debate, even battle, between board members about just how far to use their
powers to benefit themselves. Based on reports from students on the board, there was no such
debate. When queried afterwards about the board's lack of action, one board member
responded:
I do not think the other board members did understand the power of the board, which
is why they did not care too much about making the decisions. I think if the board
knew how much power they had and what they could do with it, the board would be
able to make more decisions and it would not be so hard.
This observation is consistent with a remark from the previous semester's board chairman
when asked why he did not take a more activist role:
There aren't many things you can change in the game so having a industry review
board is I feel kind of pointless.
Some students even students who had explicitly and repeatedly sacrificed profits to obtain a
seat on the board believed the board had little power, even though there had been numerous
class discussions, including the use of examples, about the board's considerable powers.
Several board members also expressed frustrations trying to communicate with others
on the board.

Deepwater: A Business Ethics Simulation Game | 24

Getting the other members to decide on those three rules was extremely difficult
because absolutely no one was responding to their emails after I had sent two and
posted it on blackboard. It was a miracle we even decided on those three rules in
time. It truly felt like pulling teeth to get the rest of the board to even get back to me
let alone actually decide on something.
At bottom, the Star Power aspect of the simulation failed to achieve its learning
objectives largely because of my own failure to adequately communicate to students the
board's powers, and because I did not provide students with an appropriate support structure
to facilitate and motivate adequate communication between themselves.

EXPERIMENTAL RESULTS THE TWO ARGUMENTS

The First Argument: No Real Unethical Choices
Recall that I presented reasons for thinking that no simulation game which confronts
students with only imaginary moral dilemmas and only opportunities to pretend to act
unethically can create the experience of encountering a true moral dilemma. From the
student's perspective, the ethical lessons taught by such simulations remain, at best, at the
level of theory and abstract principle. The obvious fix for this problem namely, providing
students with genuine opportunities to act unethically by inflicting unjust harm on innocents
would, I argued, render the simulation itself unethical.
The Deepwater simulation, as currently constructed and implemented, suffers from
this weakness. In the simulation, as in real life, accidents can injure or even kill workers.
Students can reduce the number of accidents by spending more on safety programs. Yet,
because these are only simulated injuries and fatalities, it would be perfectly ethical for a
student to consider only the financial impacts of such accidents (e.g., loss of productivity or
cost of fines) in deciding how much to spend on safety. This is very different from the real
world, where such a callous, bottom-line oriented calculus would be unethical.

Deepwater: A Business Ethics Simulation Game | 25

Students playing Deepwater recognized this weakness in the game:
The player in the simulation ultimately cares about performance of the simulated
company in terms of profitability because no real physical injuries, deaths, or
environmental damages occur as a result of lax safety. If students were running a real
oil rig, then they definitely would have more of a concern for ethical decisions.
And most succinctly:
I believe that most people did not see killing someone in the simulation an unethical
thing, because no one related to the imaginary people being killed.
Hence it seems that Deepwater cannot be an effective tool for teaching business
ethics. However, on student appears not to have noticed this limitation in the simulation, and
his comment suggests an alternative approach to meeting this challenge.
The worst part about the simulation is the reality that people get hurt and die on your
rig. It also is an awful feeling every week to wonder if you had a blowout. I know it is
a reality but it still stinks.
If the simulation, either in its design or implementation, were modified to more
strongly engage and mobilize students' moral imaginations it might not be necessary to give
students actual opportunities to behave unethically. In this spirit, several students made
suggestions such as the following:
I think that the Rig Simulation could be improved by making it a bigger deal when you
kill one of the workers on the rig. It would be interesting if somehow every time some
killed someone on their rig they were given there death certificate, or a backstory on
their family. If this was done it would be a much bigger deal to people operating the
rig. Personally, at the beginning I did not really care if I killed anyone, I just wanted
to maximize profits, but if I connected with the people I would have been able to make
more ethical decisions.
This suggests that creating opportunities for students to learn about and discuss the
consequences of unethical business behavior in class would "bring home" what is at stake and
serve as an effective substitute for confronting students with genuine ethical dilemmas.

Deepwater: A Business Ethics Simulation Game | 26

The Second Argument: Rewarding Ethical Choices
The question of how to incorporate the simulation into grading is a course design
issue, and not (at least directly) a simulation design issue. Business simulations are often part
of a course's requirements, with students' performance in the simulation a factor in computing
course grades. For example, Thompson et al (2012) in one of the standard and most-widely
utilized strategy textbooks state:
Whether class members take the simulation exercise seriously hinges in large part on
whether you make their performance count enough in the overall course grade to get
their attention. As a general rule, we recommend having performance on the
simulation count at least 20% of the overall course grade and probably no more than
40% of the total grade. If it counts less than 20%, then class member effort is
weakened to an undesirable extent and some of the learning potential slips through
the cracks. If it counts more than 40%, then the simulation exercise may take
something away from the emphasis you want to give to other aspects of the course.
As I argued earlier, incorporating a competitive ethics simulation game into a course
results in a paradox: attempts to teach ethical principles in a competitive or gaming context
must either reward students for acting ethically, thereby teaching the wrong lesson about
ethics, or must punish ethical behavior, thereby treating those who do the right thing unjustly.
I attempted to finesse this problem by having simulation results count only for extra
credit, and not as part of the course requirements. Moreover, students earned extra credit
based on their relative simulation profitability. Students in the top decile of students in all
sections of the course (usually 60-80 students) in terms of total profitability earned enough
extra credit to boost their course grade by one entire letter grade; those in the next 15%
earned a 2/3 letter grade boost; and those in the second quartile earned a 1/3 letter grade
boost. This way, students who do poorly on Deepwater in the sense of achieving below
average profits are not hurt, while those who do well reap the benefits. (Except for the

Deepwater: A Business Ethics Simulation Game | 27

simulation results, I do not grade on a curve, hence doing well on the simulation does not
reduce any other student's overall course grade.)
This approach to factoring simulation performance into a student's overall course
grade met with mixed reviews. Some students saw the simulation extra credit as a welcome
opportunity to make up for poor performance on the course requirements or as a bonus that
motivated interest.
Many people, like me, saw the extra credit as a way to help my grade if I did horribly
on the research paper.
Since there is a grade increase bonus involved you really get charged up and want to
do well.
But more students were demotivated by the extra credit approach. For them, the extra
credit opportunity pushed the simulation down on their list of priorities, and in some cases
even made it optional in their eyes.
To me the simulation was another chore it took up time that I didnt have and I
knew because it was for extra credit that it was okay that I missed it sometimes when I
was too busy with school work, work, or my internship.
I think that the simulation should be a part of the final grade for the class. This will
ensure that students will take significant time to fully understand how the simulation
works. When speaking with fellow classmates some of the students dont take the
simulation seriously.
The extra credit approach also demotivated students who experienced significant setbacks
early in the simulation.
These comments address the issue of whether simulation results should count for
extra credit only or instead should be factored into the course grade as a requirement. They
do not address the issue of what aspect of simulation performance students should be graded

Deepwater: A Business Ethics Simulation Game | 28

on, and this is the issue at the heart of the 2nd Argument against using gaming simulations to
teach business ethics.
Recall that the validity of the second argument rests upon validating the hypothesis
that business students who are rewarded for making good ethical decisions will be less likely
to identify and respond appropriately to conflicts profit and ethics. Unfortunately, no data
directly relevant to this question has been captured in the three previous iterations of the
simulation.

SIMULATION SUCCESSES AND FAILURES

Student comments suggest that the simulation fostered interaction between classmates
and presumably thereby enhanced the learning experience:
This has brought our class closer and with just the right amount of competitiveness
involved.
I do enjoy the simulation, and honestly I think I have learned more people's names in
our class due to it.
For some students the simulation also created a sense of engagement and excitement about
coming to class and participating in the simulation:
I was always excited to come to class and see where my rig ranked and was always
hoping that my rig didnt blowout.
There were differing views on the appropriateness of basing the simulation on deep
water oil production. Some students were demotivated by this:
Although the world runs on oil and we all use it, I don't see any of us, or anyone at
Eastern for that matter ever working on an oil rig. I like the concept but I feel we
would benefit from something more realistic and how to handle decisions that we
would truly most likely face in our business careers.

Deepwater: A Business Ethics Simulation Game | 29

But where I think students lose interest is right in the beginning when you tell them
that the business in the simulation is an oil company. For me, I couldnt relate to
running an oil company. I think it would really benefit the simulation if the business
was changed to a leading provider of technology, a going green business, or even
something like a brewery to make it fun.
On the other hand, several students commented on how the specifics of the simulation
engaged their interest:
Honestly, I never knew what it took to run a rig and all the factors that are involved. I
started to take an interest in oil prices and why they were fluctuating. Even though I
did not win, I did still enjoy it.
The simulation is a creative idea that gets the class involved and more aware of what
is going on in today's world.
The best aspects of the simulation are its relation to real life factors such as oil prices
and weather.
This suggests both that more work is needed to help students extrapolate from the specifics of
the simulated business to challenges of managing any business and to leverage the simulation
to expand student horizons and interests.
Several students reported that at first the whole purpose and value of the simulation
eluded them, but that eventually they did realize why it was part of the class:
Honestly at the beginning of the simulation I didn't really understand why we were
doing it but now I see how it ties into business ethics and I really like it as a different
approach to learning.
The simulation, at first I thought it was going to be a waste of time, but as time has
gone by I have actually started to learn from it.
The simulation missed the mark to some degree in striking a balance between learning
to manage a business and learning about business ethics. Few of the students in my business
ethics classes have taken the department's capstone strategy course, and few had played

Deepwater: A Business Ethics Simulation Game | 30

simulation games in other courses. Hence the simulation gave many students their first handson exposure to running a business.
The best aspect of the oil simulation is making the decisions to maximize profits. I
love feeling like a manager of a company and how I can beat competitors by making
better decisions.
The best aspect of the stimulation is the responsibility of managing/controlling our
own rig. It gives us the ability to make our own decisions and have the job of
controlling something, which is what all of us will eventually do working in the "real
world."
Some students thought the simulation's stronger emphasis on management rather than
ethical challenges was actually realistic, because in the real world the distance between
managers and employees (particularly employees doing dangerous work) often leads to
management thinking of workers simply from a financial point of view.
The simulation does not capture the [human] consequences of fatalities and injuries
caused by decisions. However, maybe this captures the distance of the reality of big
business CEOs dealing with numbers on a spreadsheet and not the people involved
on the rigs.
The simulation has showed me how easy it is to kind of laugh off injuries or fatalities
that occur on the rig.
I bet students rarely look at the total fatalities or injuries. It shows to students that if
you were in the positions of these oil executives, perhaps you would also make
decisions similar to them and the simulation.
However, for many students the management challenge so overshadowed the ethical
aspects of the simulation that the simulation became less relevant to the course. A number of
students felt the way the simulation was incorporated into the course deemphasized ethical
implications and that as a result the simulation was not very good at teaching them anything
about business ethics.

Deepwater: A Business Ethics Simulation Game | 31

To improve the simulation I would emphasize how the operating decisions that
participants make have ethical consequences, because I think some people do not
understand why we are doing the simulation.
I think the simulation could also be better incorporated into the course itself.

NEXT STEPS
Initial results from the past three semesters using Deepwater have been encouraging.
While the simulation game at this point is only, in my view, modestly successful as a method
for teaching business ethics, there are several promising lines of development for enhancing
its effectiveness.
First, the simulation needs to be much more tightly integrated with the course. My
intention for the next iteration is to use the simulation as the backbone of the course, and
make sure all readings and assignments directly tie to the real world events modeled by the
simulation. I will also include explicit opportunities for students to reflect on the purpose,
value and limitations of the simulation, and to reflect on implications for real world decisionmaking drawn from their experience with the simulation.
Second, following the student suggestions to reinforce awareness of the human costs
of business decisions, I plan in the next iteration to require students who cause a fatality to
research one of the workers killed on the Deepwater Horizon and, in their role as CEO, write
a letter to the worker's widow explaining what happened and why.
Third, more needs to be done to help students appreciate (and accept) the inevitable
uncertainty of decision-making and the role chance plays in managing a business. This is a
critical business ethics lesson, because nearly every significant business decision involves
making tradeoffs between benefits and harms.
Fourth, the Star Power aspect needs to be redesigned to effectively generate
opportunities for students to experience the dynamics of injustice in a business context.

Deepwater: A Business Ethics Simulation Game | 32

Fifth, I intend to develop data directly related to the question of the effect on learning
outcomes of rewarding students who make ethical simulation decisions. For the Fall 2012
iteration, participation in the simulation will be required and student success at balancing
profit and ethics will be factored into a student's overall course grade. Students will be
surveyed at the beginning and at the end of the course to determine how their attitudes about
the conflict between profit and ethics have changed.

Deepwater: A Business Ethics Simulation Game | 33

WORKS CITED
Bartlit, F.H., Grimsley, S.C., & Sambhav, S.N. (2011). Macondo: The Gulf oil disaster. Chief
Counsel's report - National Commission on the BP Deepwater Horizon Oil Spill and
Offshore Drilling. Available from: http://www.oilspillcommission.gov/chiefcounsels-report
Faria, A. J., Hutchinson, D., Wellington, W. J., & Gold, S. (2009). Developments in Business
Gaming. Simulation & Gaming, 40(4), 464-487. doi: 10.1177/1046878108327585
Graham, B., Reilly, W. K., Beinecke, F., Boesch, D. F., Garcia, T. D., Murray, C. A., &
Ulmer, F. (2011). Deep water: The Gulf oil disaster and the future of offshore
drilling. Washington, DC: National Commission on the BP Deepwater Horizon Oil
Spill and Offshore Drilling. Available from: http://www.oilspillcommission.gov/finalreport
Pittenger, K.K.S. (1999). Star Power: A simulation for understanding power and
empowerment. Developments in Business Simulation and Experiential Learning, 26,
221-222.
Reall, M. J., Bailey, J. J. & Stoll, S. K. (1998). Moral reasoning "on hold" during a
competitive game. Journal of Business Ethics, 17(11), 1205-1210.
Schumann, P. L., Anderson, P. H., & Scott, T.W. (1997). Using computer-based simulation
exercises to teach business ethics. Teaching Business Ethics, 1(2), 163-181.
Searle, J. R. (1990). Is the Brain a Digital Computer? Proceedings and Addresses of the
American Philosophical Association, 64(3), 21-37. Feld, S.L. (1997). Simulation
games in theory development. Sociological Forum, 12(1), 103-115.

Deepwater: A Business Ethics Simulation Game | 34

Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2012). Crafting and
Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases, 18th
edition. New York: McGraw-Hill.

APPENDIX B

Neptune Discoverer
169
CURRENT ROUND
REMAINING ROUNDS
TOTAL ROUNDS

12
10
22

OPERATIONAL READINESS
Rig Status
Rig Operating Condition
Most Recent BOP Overhaul (Round #)
Safety Inspection Conducted?
Current Weather
Next Period Forecast

Rig ID
Operator
Rig Name

Rig169
Jessica C.
Neptune Discoverer

CURRENT ROUND DECISIONS

Operate Rig?
Overhaul BOP?
Production Volume (bbls)
Maintenance Expense ($/bbl)
Safety Expense ($)

Operational
41%
n/a
No
Beaufort 3
Beaufort 4

Yes
No
950,000
$20
$3,000,000

PRODUCTION STATISTICS
Through Prior
Round

This Round

Cumulative

Production (bbls)

10,275,000

950,000

11,225,000

Safety Violations
Injuries
Fatalities

0
0
0

0
0
0

0
0
0

OPERATING RESULTS ($000,000)

Through Prior
Round

This Round

Cumulative

Operating Revenues

1,065.9

Royalty Expense
Operating Expense
Maintenance Expense
BOP Overhaul Expense
Safety Expense
Lobbying Expense
Fines
Operating Expenses
$
Operating Margin

100.9

(159.9)
(411.0)
(221.4)
(29.0)
(821.3)

(15.1)
(38.0)
(19.0)
(3.0)
(75.1)

244.6

25.8

MARKET REPORT ($000,000)

Average
bbls per
935,417

Averages
per bbl

1,166.8

103.95

(175.0)
(449.0)
(240.4)
(32.0)
(896.4)

(15.59)
(40.00)
(21.41)
(2.85)
(79.86)

270.4

24.09

MANAGEMENT CONSOLE
Set Values for Period:
$

Current Price ($/bbl)

13

106.26
Operate Rig? (Y/N)
Overhaul BOP? (Y/N)
Production Volume (bbls)
Maintenance Expense ($/bbl)
Safety Expense ($)

58
37
0

Operational Wells
Shut-in Wells
Blow Outs

N/A if operating rig

$11.2

Cumulative Social Cost

CRUDE OIL PRICE HISTORY (by Round Number)

$120
$115
$110
$105
$100
$95
$90
$85
$80
$75
$70
-29

-24

-19

-14

-9

-4

11

16

WEATHER HISTORY (by Round Number)

8
7

Beaufort Scale

6
5
4
3
2
1

0
0

10

15

20

21

APPENDIX C
Financial Management Report (FMR)

Neptune Discoverer
CURRENT ROUND
REMAINING ROUNDS
TOTAL ROUNDS

12
10
22

INCOME STATEMENT ($000,000)

Current Round

Company ID
Operator
Company Name

Oil169
Jessica C.
Neptune Discoverer

Cumulative Ratios (Cumulative)

Revenues
Crude Oil Sales

100.9

1,166.8

Expenses
Royalties
Operating Expenses
Maintenance (inc. BOP Overhaul)
Safety
Lobbying
Fines
Total Operating Expenses

$
$
$
$
$
$
$

15.1
38.0
19.0
3.0
75.1

$
$
$
$
$
$
$

175.0
449.0
240.4
32.0
896.4

15%
38%
21%
Share of Revenue
3%
0%
0%
77%

Operating Income

25.8

270.4

23% Operating Margin

Other Income (Expense)

Interest Income
Interest (Expense)
Total Other Income (Expense)

$
$
$

0.2 $
(1.9) $
(1.7) $

1.4
(23.1)
(21.7)

11.7 Interest Coverage Ratio

Net Income

24.1

248.7

BALANCE SHEET ($000,000)

Beginning

$
$
$

15.0
1,000.0
1,015.0

$
$
$

261.7
1,000.0
1,261.7

Liabilities and Equity

Long-term Debt

600.0

598.0

415.0

663.7

1,015.0

1,261.7

Total Liabilities and Equity

PRIMARY BANK:
Bank02
DEPOSIT ACCOUNTS ($000,000)

Bank Name
North Star Bank
Freedom Financial
Bank of Hong Kong
Gulf Bank

Bank ID
Bank01
Bank02
Bank03
Bank04

Total All Banks

97.2 Avg per round

21.3% Return on Revenue

Current Round Ratios (End of Current Round)

Assets
Current Assets (Cash)
Property and Equipment
Total Assets

Equity (Net Worth)

0.9 Debt-to-Equity

Freedom Financial

Simulation
Beginning Balance
$
$
15.0
$
$
-

Balance End of
Previous Round
$
$
237.6
$
$
-

Ending Balance
This Round
$
$
261.7
$
$
-

Interest Earned
Current Round
$
$
0.2
$
$
-

Cumulative
Current
Interest Earned Interest Rate
$
$
1.4
2.00%
$
$
-

15.0

237.6

261.7

0.2

1.4

OUTSTANDING LOANS ($000,000)

Bank Name
North Star Bank
Freedom Financial
Bank of Hong Kong
Gulf Bank
Total All Banks

Bank ID
Bank01
Bank02
Bank03
Bank04

Simulation
Beginning Balance
$
$
600.0
$
$
-

Balance End of
Previous Round
$
$
598.0
$
$
-

Ending Balance
This Round
$
$
598.0
$
$
-

Interest Paid
Current Round
$
$
(1.9)
$
$
-

600.0

598.0

598.0

$
$
$
$

(1.9) $

Cumulative
Current
Interest Paid Interest Rate
(23.1)
7.25%
(23.1)