The Meaning of Firm Demand in Business Simulations
AbstractThis traditional approach in business simulations to computing firm demand is to first compute a set of weights and then use these weights to compute market share percent-ages. Demand for each firm then is computed by multiplying market share percentages times industry demand. This approach is analyzed in this paper and the methodology is analyzed and criticized in terms of whether the approach has been logically explained. A new approach to computing firm demand is presented. The new approach does not require that market share percentages be computed. Also, the new approach introduces the concept of potential customers and also introduces average purchases per potential customer as an important value in determining firm demand.
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