Utilization of graph theory and dynamic programming as substitutes for decision trees
Ross H. Johnson Ph.D., Paul R. Winn Ph.D.
Journal of the Academy of Marketing Science · 1973 · Volume 1 · Issue 2
Abstract
A methodology is presented to select from two marketing or pricing plans with the objective of maximizing profit. The decision structure is portrayed in graphical form, with alternate stages of decision and uncertainty. A standard dynamic programming algorithm is used to solve the graph and aid in final decision making. A decision path is plotted at each decision vertex on the graph such that the decision maker can determine, at any combination of sales volume and time period, which of the two marketing plans to follow from that vertex so as to achieve the greatest expected profit for the remaining span of time.
Keywords
Dynamic Programming, Price Policy, Dynamic Programming Algorithm, Penalty Cost, Expected Profit
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