How are results presented? Suppose you wish to find an optimal solution in terms of the expected business volume and profit. All possible strategies (e.g. price schedule) will map to different levels of each of these and may be plotted on a two-dimensional grid as shown below.

The shaded area in the figure represents the map of all possible pricing strategies. Within this area, Strategy B is superior to Strategy A as it increases profit for no loss of business volume. Similarly, Strategy C is superior to Strategy A as it increases business volume for no loss of profit.

Strategy D is again superior to B, and in fact lies on the efficient frontier. The efficient frontier consists of the boundary of the set of strategies such that no strategy on the frontier is surpassed by another in both expected business volume and profit. Thus, if a business volume of 1.2 million is required, then the efficient frontier tells you that only Strategy D will maximise the expected profit.

For more detailed information contact Richard Brookes or Alan Greenfield.