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Simulation and Decision Making
Pages 3 (753 words)
Simulation and decision making Name: Institution: Every firm or company in the business industry has the sole objective of profit maximization unless it is a parastatal. In pursuit of these profits therefore, different critical decisions have to be made in order to ensure that uncertainties are avoided.
Repeated trials are also important in ensuring success of the projects (GoldSim, 2012). A simulation played in the monopoly market would have no problem in the case of using pricing as a tool. This is because, since there are no competitors in the market, then the monopolist can choose to raise the prices up to the point where he makes supernormal profits. He or she however, still has to consider the possible effects of the high pricing on the firm due to cases of dead weight losses. In playing the simulation for a perfectly competitive firm, two factors have to be considered: the possibility of customers shifting to other buyers and the possibility of making massive losses due to low prices set. In order to completely optimize the profits therefore, the business may decide to just maintain the same prices but improve the quality instead (Smith & Smith, 2011). In playing the simulation, for a monopoly market structure, the firm may limit the amounts of funds directed to advertising and promotion since the firm has no competitors. Some advertising may however be required to create awareness about new products in the firm or shifting of the location. In a perfectly competitive market and a monopolistic competition, firms need to promote their products entirely since the competition in the two markets is stiff. ...
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