DMA - 4Star Case

Notes: we have 3 things that we can optimize for

• Revenue Maximization
• Cost Minimization
• Profit Maximization

For this case, we perform a revenue maximization because the cost has already been incurred. That is, we already bought 265 tires, there is no cost to minimize. Additionally, the case said that there is no replenishment of tires. Thus, we cannot minimize costs by buying less tires. If we could buy more tires throughout the season, then it may be profit maximization. This is important because we don’t want our optimizer to then sell the tires for less than its cost and we must maximize profit.

We also need to use GRG Non-Linear solver here because this is not a linear problem. This is because, quantity is a function of price, and revenue is a function of quantity and price, thus.

$$Q(p)=a-b\ast p$$ $$R(p)=pQ(p)=ap-b\ast p^2$$