Informational Docket
Note: this file is best viewed on desktop.
Client City Profile:
Location: Northern India
Population: 1,000,000 residents
Area: 150 square kilometers
Economic Activity: Mixed economy with a significant manufacturing sector and growing IT services.
Total Investment Funds: 1,600 million INR with option to apply for a further 1,000 million INR in low-interest loans from the Central Government
Operating Funds: 310 million INR/year, with the option to spend a further 200 million INR/year by levying local property taxes.
While the city has certain funds, you shouldn’t necessarily spend all of the budget. If your analysis concludes that the marginal costs exceed the marginal benefits at one point, you should advise the government to save that money to spend on upgrading other infrastructure, such as local schools and roads.
Registration deadline on March 10!
Simplified Map of the City:
Registration deadline on March 10!
The city is broken down into 6 main types of regions. You will find a description of the 6 regions in the memo below.
1. Metropolitan Regions
Metropolitan areas have a very high population density and also high land costs. There are a lot of people and while the risk of fire in any given year is low, any potential damage is very high. Further, a fire risks collapsing a skyscraper, which means that nearby buildings could also be affected.
As part of your project proposal, you have a special option in metropolitan areas which you don’t have in other regions; you can install water sprinklers within each high-rise building, which will reduce the marginal cost of a fire. You should evaluate this option and determine whether the city administration should pay for it.
2. Suburban Regions
Suburban regions have low population density and lower land costs in comparison to metropolitan regions. However, there is a higher risk of a fire because most homes lack smoke detectors and are made of less advanced building materials which are more susceptible to fire. However, due to the lower population density and sparse land area, the financial damage from a fire is much lower than in metropolitan regions.
In suburban regions, you have a special option to finance a social program through which the city administration will install smoke detectors in each home, which will reduce the risk of fire. Your task is to evaluate this option and determine whether the city administration should pay for it.
3. Industrial Regions
The city has 2 major industrial areas. The industrial areas contain factories which are the lifeblood of this city’s economy, employing 32.2% of the local population. Industrial areas have a very low risk of fires as the factories follow the latest best practices in fire prevention. However, if a fire is to occur, the economic damage to the city will be colossal. The city cannot afford a fire in the industrial area.
4. Parks
Parks are where the city’s population goes to relax. This is where kids play sports and the senior citizens do yoga. Parks have a relatively low chance of fires and a fire in a park would not cause much economic damage. However, a fire would result in environmental damage and risk the city’s social welfare, as it is a common leisure spot for many of the city’s populace.
5. Rainforests
Rainforests have a very high risk of fires, especially during the summer months where the climate is dry and temperatures can exceed 45° Celsuis. While a fire in a rainforest will not have many economic consequences, the environmental damage could be catastrophic.
Additionally, a rainforest fire has a very high risk of spreading to adjacent regions. If a rainforest fire is not quelled, there is a 25% chance that an adjacent region will be set on fire.
6. Water Sources
A river flows through the city. Over the years, the river has been a facilitator of the economy, allowing goods to be traded from far away lands. In the context of this fire department project, you should note that water sources play an important role when it comes to fires. The Fire Department’s helicopter picks up water from these resources to put out large fires.
Registration deadline on March 10!
Risk Assessment of City:
The city’s current fire bureau has conducted an assessment of the city’s various regions. They estimate the chance of a fire occurring in any given year and the potential damage that could occur if a fire does occur.
Registration deadline on March 10!
Requirements to Quell Fire:
Each region requires different fire equipment to quell a fire. In certain regions, the city also have special options which they can purchase.
The necessary fire equipment must reach the zone of fire within 25 minutes of the fire.
Registration deadline on March 10!
Land Costs:
In your project proposal, you will need to highlight which areas to build fire bases in. Luckily, the city administration can take advantage of an ‘eminent domain’ law, which allows the city to acquire land anywhere in the city. Different regions have different land costs, and you will need to take this into account in your calculations.
Registration deadline on March 10!
Types of Firebases:
The City Administration has contracted a construction firm that specializes in building fire bases. Below are the prices they have been quoted.
Registration deadline on March 10!
Types of Fire Vehicles:
The city administration has partnered with a legacy fire vehicle builder, which has quoted them the below prices.
Registration deadline on March 10!
Average Response Time:
The city administration wants to target an average response time of 15 minutes and an average full response time of 25 minutes. This means that the 1st vehicle on scene should arrive within 15 minutes, and the full squad necessary to quell the fire should be on scene within 25 minutes.
Registration deadline on March 10!
Why is the city spread into various pieces?
Each piece represents a zone. Each zone indicates a 5 minute response time. If a fire occurs in the zone where a fire department is located, then the fire department will have a 5 minute response time. Even if there is water, the fire vehicles will be able to cross them via bridges or tunnels.
However, if a fire truck has to cross a border to an adjacent zone, the response time will increase by an extra 10 minutes. For every border a fire truck crosses, its response time increases by 10 minutes. Assume that a fire truck will always take the shortest route.
Registration deadline on March 10!
See example 2 below:
The response time will be 15 minutes, because the fire truck had to cross a border to go to the adjacent zone.
Registration deadline on March 10!
See example 3 below:
Registration deadline on March 10!
See example 1 below:
The response time will be 5 minutes, because the fire is in the same zone as the fire department.
Registration deadline on March 10!
The response time will be 25 minutes, because the fire truck has to cross 2 borders to the fire. Notice that the fire truck always takes the shortest route. It does not take the long route below which would cross 7 borders and take 75 minutes to get to.
Registration deadline on March 10!
Budget:
Investment Budget:
Your budget for this project is 1,600 million INR. However, if you need additional funding, the city can apply for a low-interest loan grant from the Central Government for an additional 1,000 million INR. Ideally, the city administration would not want to take this approach, but they are happy to pursue the option if that is what is required.
Operating Budget:
Further, the city administration’s CFO has determined that the city can spend 310 million INR each year on operational costs for the fire department. If that is too little, the city administration also has the option to levy annual property taxes to raise a further 200 million INR/year. However, the city would prefer to not levy property taxes as it is unpopular with the general public.
Under ideal circumstances, the city would like you to spend less than the allocated budget, because the city administration wants to use any surplus to invest in local schools and road infrastructure.
Your task now is to come up with a project plan to identify where various fire bases should be built, what types of fire bases should be built, and which types of fire vehicles should be purchased in order to minimize the risk of fire damage while meeting the city’s targets for average response time.
You should aim to meet your budgetary guidelines.
Notice:
Note that this is an ambiguous case and that there is no correct answer. You should aim to communicate your answer most succinctly and clearly. While you do not have to show your working in the project proposal, you would be well-advised to share a coherent appendix file so that the jury can see your working and audit your calculations.
Feel free to write to ‘contact@economicsworldcup.org’ if you have any questions about the project. The Team will publicly answer upto the 3 most asked questions each day, if they are relevant to the case
Your submission will not be released publicly as the EWC is committed to protecting your privacy.
Best of luck!