Revenue maximization

The foregoing discussion suggests that sponsors should measure potential patent revenues not only by the revenue-maximizing price that the private partner could theoretically charge, but also by the access price. In general, patent revenues will be most useful where the stream of medicines earmarked... 

This feature took the form of a parameter representing the degree of revenue-maximizing behaviour. The value of this parameter (between 0 and 1 within the mathematical framework of the model) was set so that, where there was a possibility of companies increasing their profits as a result of the policy levers, this would never be implemented in a manner such that it would attract new entry and therefore be self-defeating, i.e. that the firms exhibit limit pricing (see later discussion on profit maximization). As a result, new entry was only assumed to take place when companies did not have the opportunity of increasing their profits as a result of the policy levers introduced. 

Based on the net revenue maximizing strategy, we conclude that between 1992 and 2001, the raisin industry would have benefited from an ethanol industry in 6 out of 10 yr. The additional net revenue in the beneficial years ranges from 0,689 million dollars in 1992 to 6,686 million in 2000 (Table 5). Preliminary market information from the 2002 harvest suggests that similar benefits might have been generated in that year. 

We ignore these issues and focus separately on revenue maximization and efficiency. We first identify what the theory has to say about the design of auctions to achieve each of these objectives. It will be seen that these auctions are impractical to implement as is and adjustments must be made. These adjustments come at a price and we will identify the tradeoffs that must be made. 

We now put the revelation principle to work to identify auctions that meet two obvious and popular goals. The first is revenue maximization, the second is economic efficiency. For a more detailed treatment of the mechanism design perspective see 2.2 of Chapter 5 by Kalagnanam and Parkes. 

It seems then, if efficiency is the goal, we have an answer as to what kind of auction to run VCG. In the sections that follow we discuss some of the issues that arise in implementing the VCG auction. The reader interested in revenue maximization will still benefit for two reasons. First, these issues are not unique to the VCG. Second, for reasons not formally modeled, one may be forced to use an efficient auction rather than a revenue maximizing one. These have to do with resale and long term participation by bidders and are discussed in Ausubel and Cramton [3] as well as Milgrom [51]. 

Should it be a revenue maximizing auction For a private entity perhaps, but for a public one, not. In the case of the UMTS-auction, the government was primarily concerned with efficiency. That is, does the auction allocate the licences to the ones that will make the most efficient use of them. There is also the subsequent competition to provide communication services amongst the winners to be considered as well. To provide sufficient competition, the government must ensure enough winners at the auction. 

Thus, a good source of potential revenue for products and services exists in the multitude of smaller boiler-houses to be found operating around the globe. It is here that practical advice is most often needed concerning the suitability and correct application of chemical treatments, the regular interpretation of analytical results obtained, and the strategies to be employed to maximize efficiency and reduce costs. 

Task Maximize revenue in the BATCH 1 example presented in Chapter 2 through exploitation of PIS philosophy for both reactors over an 8 h time horizon. 

In addition to their ability to capture the multidimensionality of batch operations, another advantage of mathematical programming techniques is the flexibility and adaptability of the performance index, i.e. the objective function. In a design problem, the objective function can take a form of a capital cost investment function. In a scheduling problem it can be minimization of makespan, maximization of throughput, maximization of revenue, etc. In this chapter, the objective function will either... 

The objective function for the literature example is the maximization of a profit function over a 10 h time horizon that takes revenue, freshwater and wastewater treatment costs as follows. 

The decisions should be taken in an optimal fashion subject to the plant topology and the processing constraints with the objective to maximize the profit, given as the difference of revenues for products and costs for the production. The demands are specified by their amounts and their due dates, where the revenues decrease with increasing lateness of the demand satisfaction. The production costs consist of fixed costs for each batch and for the start-up- and shut-down-procedures of the finishing lines, and variable costs for the product inventory. 

The occurrence of the set-up procedure in period i is denoted by the binary variable Wi (0 = no, 1 = yes). The production costs per batch are denoted by p = 1.0 and the cost for a set-up is y = 3.0. Demands di that are satisfied in the same period as requested result in a regular sale Mi with a full revenue of a = 2.0 per unit of product. Demands that are satisfied with a tardiness of one period result in a late sale Mf with a reduced revenue of aL = 1.5 per unit. Demands which are not satisfied in the same or in the next period result in a deficit Bf with a penalty of a = 0.5 per unit. The surplus production of each period is stored and can be sold later. The amount of batches stored at the end of a period is denoted by Mf and the storage costs are a+ =0.1 per unit. The objective is to maximize the profit over a horizon of H periods. The cost function P contains terms for sales revenues, penalties, production costs, and storage costs. For technical reasons, the model is reformulated as a minimization problem ... 

The objective is to maximize the profit which is calculated by a cost model of sales revenues, production costs, storage costs, and penalties for lateness and for finishing line start-ups and shut-downs. The cost model adds some equality and inequality constraints with associated real valued variables for the sales, deficits, and the storage, but it does not further restrict the feasibility of the production decisions. 

As prices and revenue were not considered, maximization of net present value was equivalent to minimization of net cost. 

The reason for this is mostly rooted in the fact that historically the fine chemicals industry is a product (and not process) oriented industry, i.e. it focuses on the development of new products to maximize revenues in the... 

Demand-oriented management concepts focus on sales price and sales quantity decisions to maximize turnover with a given or unrestricted supply. Demand-oriented research areas are micro-economics specifically for price mechanisms (Varian 1994), sales and marketing (Effort 1998 Kilter/Keller 2005) and recently revenue management (Cross 2001 Tallury/Van Ryzin 2005). 

Objective function a profit maximization function over the time horizon is considered as the difference between the revenue due to product sales and the overall costs, with the latter consisting of the cost of raw materials, operating cost, investment cost, and inventory cost ... 

Nowsuppose that price discrimination is perfect. In this case, manufacturers can offer deep discounts to the poorest patients with no effect on patent revenues. In fact, profit-maximizing manufacturers will automatically offer such discounts until prices reach their marginal cost of production (Reinhardt, Chapter 2). This means that sponsors should subsidize production only if the desired access price is below marginal cost. 

Using a well known result, for a linear demand curve, marginal revenue is MR = (-a/ ) + (2/p)q. The profit maximizing output is that at which marginal revenue equals marginal cost, or 10. Equating MR to 10 and solving for q produces q = a/2 + 5p, so we require a confidence interval for this combination of the parameters. 

The objective function maximizes the net present value of cash flows before taxes. It contains three major components country revenues, site costs and inventory carrying costs. To improve legibility, the equations calculating the parameters contained in the objective function are discussed below ahead of the actual model restrictions. 

In order to maximize the net present value of after-tax cash flows the model proposed in Chapter 3.4.2 has to be extended to determine the taxes payable in each country. To this end, pre-tax country profits comprising profits realized at both production and distribution entities have to be calculated. While the pre-tax profit of distribution entities can be calculated easily by subtracting all costs incurred from revenues realized, additional adjustments are required for production entities. Instead of cash flows associated with capital investments, depreciation costs have to be considered to identify pre-tax profits. The following assumptions are made to simplify the calculation ... 

At the heart of creating a revenue advantage is the need for chemical companies to complement their asset-forward view (i.e., maximizing asset utilization) with a market-back view (i.e., maximizing margins based on what customers are willing to pay) of customers current, latent, and unmet needs. This requires the development of much more sophistication and understanding of the marketplace and... 

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