Two Algorithms for Redistribution of Stockouts in Computerized Business Simulations

Abstract

"This paper is concerned with the design and development of computerized business simulations which are competitive and interactive in nature. Specifically, it deals with the modeling of loss sales (i.e. stockouts) and their impact on game play. The paper reviews how stockouts are modeled in a number of commercially available computerized and interactive business games. In some of the simulations reviewed, stockouts, either small or excessive in magnitude, are lost forever - returning neither to the firm nor to the competing firms. Other designers penalize the firm for having excess demand potential by reducing their actual sales potential in the current and future periods. Other simulations redistributed (i.e. by forces of supply and demand) excessive loss sales to the other firms. In all of these stockout routines, the design was to represent, in some fashion, how lost goodwill, lost sales, and their redistribution might occur in the “real world.” Extreme care, however, should be taken in the adjustment and redistribution of stockouts. Carelessly prepared stockout routines can lead to unrealistic strategies in game play, such as: ""It pays to stockout this period for the stockouts return next period. We will raise our price in the next period and make a real killing”, or “Since the semester is near completion and since we cannot possibly win this game, let’s destroy it for the rest of the firms. Let’s raise our advertising and cut our price to $.l0 and capture the entire market.” To avoid such distortion problems TWO algorithms for the redistribution of excessive stockouts are presented. Both algorithms check to ascertain if excessive stockouts have occurred, and if they have, they are redistributed in the same period to other competing firms via the forces of supply and demand. The strengths and weaknesses of each routine are presented along with a brief discussion concerning altering the routines encompassing other lost sales issues. "