Miklos Sarvary

Formulating Dynamic Strategies Using Decision Calculus

Coauthor(s): Philip M. Parker.

Abstract:
This paper presents an applied methodology to assist managers in strategically setting prices and allocating resources over the product, brand, or adoption (diffusion) life cycle. While substantial theoretical work has been achieved in this area in the management science and operations research disciplines, approaches which can be implemented as managerial tools are generally lacking. Our methodology, which has been applied as a PC-based decision support tool in the telecommunications industry, marries the dynamic optimization literature with decision calculus approaches offering sufficient flexibility for applied contexts. We discuss the approach and describe its use to derive optimal price and advertising policies. Strategies not commonly suggested using traditional formulations are also presented.

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