Simulating Market and Firm Level Demand - A Robust Demand System

Steven C. Gold, Thomas F. Pray


"The paper presents an approach to modeling and simulating demand which is based on contemporary economic and marketing theory and employs stable mathematical Functions. The paper reviews same of the pitfalls of Functions have been used by simulation designers to model both the industry and firm level demand in an-going computerized business simulations, A robust and ideal demand function (system) is presented, consisting of a series of mathematical equations which embody the following concepts and points: multiplicative industry and firm demand functions with variable elasticities, exponential smoothing on demand variables, a current period stack-out reallocation algorithm, a system of checks an faulty decision inputs, and other marketing and economic concepts such as diminishing returns and market share considerations. The paper concludes with a numerical example demonstrating the flexibility of the ideal system. "

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