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Write the detailed description of the problem, the model, the result obtained so far, and the scope of the remaining work.

MGT 207 Group Project Proposal Group 13 – Chen Yin, Mohan Zhao, Ziyi Zheng, Runbo Zhang

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Pricing and inventory management: Car rental

Introduction

In this case, we as the regional manager of Hurts Car Rental Company will be making pricing

and fleet size decisions for the Tampa branch in order to maximize the expected total profits in

the next month while considering the behavior of our customers and competitors. The purpose of

this proposal is to briefly identify the problem we will be working on and discuss the

mathematics parameters, methodology and model construction we will use to accomplish the

model-building, statistics analysis and simulation running process in order to draw the final

conclusions as well as give our recommendations. We will also share the timeline plan of our

project that will keep us on schedule during the working process.

Simulation Question

Simulate different combinations of fleet size and Hurts’ price given the price strategy of the

competitor, identify the optimal price strategy that maximizes the profit for Hurts.

Objectives

The objective of the project is to create a pricing and fleet size strategy to maximize the profit of

our company when the pricing strategy of the competitor is known.

Methodology

To simulate in Excel, we will first construct the simulation for one week, and use

0.8+RAND()*0.4 for the coefficient of competitor’s price in period regarding Hurts’ price in

period t-1. After that, run the simulation for Nt, πt, Dt and Rt for t=1,2,3,4. Since Dt follows

normal distribution, it will be simulated with MAX(0,NORM.INV(RAND(),mu,sigma)). After

that, get the sum for R1, R2, R3, R4. Put the sum in the simulation for 10^3 months and use

what-if analysis to get the simulation result for each combination of Q and p1. Then, calculate

MGT 207 Group Project Proposal Group 13 – Chen Yin, Mohan Zhao, Ziyi Zheng, Runbo Zhang

the fill rate and expected monthly profit from the simulation result for each combination, thus

determine the optimal combination of Q and p1. During the simulation, we will attempt to find

ways to integrate multiple simulations in the same worksheet, since it would need more than 40

worksheets otherwise.

Mathematical parameters

Notation Meaning

πt(pt) The market share

St The Weekly day-car supply

P 1/t Hurt’s price for week t

P 2/t Competitor’s price for week t

Q The Fleet size

V The monthly total profit

f The monthly fill rate

Dt(pt) Hurt weekly demand

Rt(pt, St) The Revenue in week t

Nt(pt) Market size

Timeline

● Week 6 – Initial project proposal submission

● Week 7 – Data editing and categorizing, model building, statistical analysis

● Week 8 – Interim report submission, excel rough draft done

● Week 9 – Related problem extended simulation, final report writing

● Week 10 – Final report writing, proof-reading and submission.

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