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Strategic Product Design Decisions for Uncertain Market Systems Using an Agent Based Approach

[+] Author Affiliations
Z. Wang, S. Azarm, P. K. Kannan

University of Maryland, College Park, MD

Paper No. DETC2010-28778, pp. 291-303; 13 pages
doi:10.1115/DETC2010-28778
From:
  • ASME 2010 International Design Engineering Technical Conferences and Computers and Information in Engineering Conference
  • Volume 1: 36th Design Automation Conference, Parts A and B
  • Montreal, Quebec, Canada, August 15–18, 2010
  • Conference Sponsors: Design Engineering Division and Computers in Engineering Division
  • ISBN: 978-0-7918-4409-0 | eISBN: 978-0-7918-3881-5
  • Copyright © 2010 by ASME

abstract

Market players, such as competing manufacturing firms and retail channels, can significantly influence the demand and profit of a new product. Existing methods in design for market systems use game theoretic models that can maximize a focal manufacturing firm’s profit with respect to product design and price variables given the Nash equilibrium of the market system. However, in the design for uncertain market systems, there is seldom equilibrium with players having fixed strategies in a given time period. In this paper, we propose an agent based approach for design for market systems that accounts for learning behaviors of the market players under uncertainty. By learning behaviors we mean that market players gradually, over a time period, learn to play with better strategies based on action-reaction behaviors of other players. We model a market system with agents representing competing manufacturers and retailers who possess learning capabilities and are able to automatically react and make decisions on the product design and pricing. The proposed approach provides strategic design and pricing decisions for a focal manufacturer in response to anticipated reactions from market players in the short and long term horizons. Our example results show that the proposed agent based approach can produce competitive strategies for a focal firm over a time period when market players react only by setting prices compared to a game theoretic approach. Furthermore, it can yield profitable product design decisions and competitive strategies when competing firms react by changing design attributes in the short term — a case for which no previous method in design for market systems has been reported.

Copyright © 2010 by ASME
Topics: Product design

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