Multi-criteria optimisation of budgeting decisions by telecommunication service providers in a simulation game

Vadim Kyrylov and Carole Bonanni

International Journal of Management and Decision Making, 2006, vol. 7, issue 2/3, 201-215

Abstract: We propose a multi-criteria model for budget allocation decisions made by telecommunications firms in a computer-based business strategy simulation game. Optimality criteria reflecting the anticipated rewards and risks are represented by modified Cobb-Douglas production functions. Some of these take into account anticipated actions of competitors which is a new approach in multi-criteria decision making as we know it. Because the decision space and the criteria functions are all convex, the optimisation problem becomes a convex one; it can be reduced to minimising a single utility function, i.e., the weighted sum of the criteria. In this instance, it is possible to set the weights of each criterion to reflect the firm's strategy (e.g., aggressive vs. defensive). Therefore, we provide a closed-form algorithm for solving an optimisation problem in an automated mode.

Keywords: Cobb-Douglas production function; multi-criteria decision making; MCDM; telecommunications industry; market simulation; budgeting decisions; business strategy; simulation games; budget allocation. (search for similar items in EconPapers)
Date: 2006
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