Visual Modeling Tools

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VisualModeling Tools
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Outline Profit Maximizing Pricing

• First Pass
• Profit
• Total Revenue
• Total Cost

• Second Pass
• Profit
• Total Revenue
• Quantity Sold
• Unit Price
• Total Cost
• Fixed Cost
• Variable Cost

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Outline Profit Maximizing Pricing

• Third Pass
• Profit
• Total Revenue
• Quantity Sold
• Unit Price
• Price Elasticity
• Unit Price
• Total Cost
• Fixed Cost
• Variable Cost
• Quantity Sold
• Unit Cost

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Outline Profit Maximizing Pricing

• Final Model
• Revenue
• Unit Price
• Price Elasticity
• Quantity Sold F ( Unit Price, Elasticity)
• Total Revenue Quantity Sold x Unit Price
• Cost
• Fixed Cost
• Unit Cost
• Variable Cost Quantity Sold x Unit Cost
• Total Cost Fixed Variable Cost
• Profit Total Revenue Total Cost

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Influence Diagram Profit Maximizing Pricing
PASS 2
PASS 1
Revenue
Revenue
VariableCost
Cost
Cost
FixedCost
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Influence Diagram Profit Maximizing Pricing
PASS 3
Revenue
QuantitySold
VariableCost
UnitCost
Cost
FixedCost
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Influence Diagram Profit Maximizing Pricing
PASS 4
Price
QuantitySold
Revenue
VariableCost
UnitCost
Cost
FixedCost
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Influence Diagram Profit Maximizing Pricing
FINAL PASS
Price
QuantitySold
Revenue
Elasticity
VariableCost
UnitCost
Cost
FixedCost
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SS Kuniang Case

• NE Electric was deciding how much to bid for the
  salvage rights of ground SS Kuniang. If bid is
  successful, ship could haul coal. If damage is
  low, ship can be used immediately, otherwise
  repair work is needed. Other options are buying
  new ship use tug/barge combo. NEES thinks 2m bid
  would definitely lose and 12m bid would
  definitely win.
• Use P(win) (Bid - 2m) / 10m

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Influence Diagram SS Kuniang Case
Cost of New
Cost of Tug
Cost of SS Kuniang
Revenues
Bid
NPV
Win?
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SS Kuniang CaseSpreadsheet Model
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Network GraphLogistics Network
10 5 7
Parameters Capacity Limit Transportation Cost
c(i,j)node i to node j Demand Limit
1 2 3
ORIGINS
TRANSSHIPMENT NODES
4 5
6 7
DESTINATIONS
9 12
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Logistics NetworkFeasible Flow
10 5 7
1 2 3
Constraints
10 5 6
4 5
9 12
6 7
9 12
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Logical Network ModelExample
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Logical Network Example Simple
R RegularPT Part Time
PT 3
PT 1
PT 2
PT 4
PT 5
20
R 1
R 2
R 3
R 4
R 5
R 6
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Logical Network Example
Node Conserves Flow Splitter Doubles Flow
R RegularPT Part TimeD Demand
Splitter Node
PT 2
PT 3
PT 4
PT 5
PT 6
PT 1
5
5
5
5
5
5
D 1
D 2
D 3
D 4
D 5
D 6
200
210
250
230
210
240
7
7
7
7
7
7
20
R 1
R 2
R 3
R 4
R 5
R 6
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Decision TreeInvestment Project (Pass 1)
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Decision TreeInvestment Project (Pass 2)