Tionna Taylor-Game Assignment 1

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Jackson State University *

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5310

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Economics

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Feb 20, 2024

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Tionna Taylor Game Assignment: Round 1 Each round, I am challenged with balancing ethical expenses (maintenance, safety spending, training, and overhaul) with the greed of revenue and desire to profit off of oil production and prices. In any given round I must choose between production or shut-in, which is typically influenced by whether and safety precautions. By choosing to produce, I have more revenue to use for future rounds, but by shutting-in, I am choosing to skip a round of work, losing money. The risk in this decision is the potential for fatality or injury if I choose to make workers work in hazardous conditions, however, the uncertainty is the actual whether conditions for that round (forecasted is not always actuality). With this also comes choosing whether to invest into training and safety spending. These may seem like a wasted fixed expense at times, however, can be the difference in saving my workers from injury or fatality and company fines. Another decision would be to balance the amount of production and the potential for blowout. According to a trend analysis from Det Veritas Oceanus, as “Production Multiples increase and BOP overhaul is ignored, the probability of blowout increases” (Det Veritas Oceanus 2013). So, if I choose to continue putting off BOP overhaul and increase production, I am continuing to run the risk of blowout which leads to injuries, fines, and having to rebuild the rig. The uncertainty comes from the unknown life expectancy of the BOP and never knowing what or when the blowout will be triggered. Another part of this risk comes from running maintenance. Whether I choose to run maintenance each round and how much is a risk because even though reports may not suggest maintenance, it can be better to continually do them to be on the safe side and lead to less unexpected failures. The other major decision to be made each round is the implement a plan of pollution control. This is more of an ethical choice because an individual can choose not to care and increase net income by not spending, however, runs the risk of having a high social cost and impacting the greater surroundings. The overall role of uncertainty and risk when it comes to making trade-off decisions relies on the corporate governance of ethics vs. company success. There are times to take risk to win big and there are times that the risk is greater than the reward and it is better to take a round of shut-in or spend more on overhauls, maintenance, safety, training, etc. As it comes to my personal strategy for risk-taking, I am looking to make baseline decisions for most rounds, with slight variations in production levels, maintenance spending, safety spending, and sporadic hiring of crew members. When it comes to risks, I am willing to postpone essential expenses by one round, but no more than that. For example, if I anticipate maintenance or lowering of RECI, I may wait a round to try and increase cash flow and feel safe with missing the next round. However, if I anticipate hazardous conditions or am on the verge of blowout, I am not willing to take the risk and will shut-in or BOP overhaul to avoid bigger costs/fines and get back to production in the next round. Resources Det Veritas Oceanus. (2013). Analysis Background Deep Water Oil Well Blowouts as A Function of Production Multiples. Retrieved January 26, 2024, from http://files.deepwatersim.com/production/questions/13/open/DVO_Consulting_Services_Repor t.pdf

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