An Experimental Method for Profit Maximization
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Authors
Rice, Donald B.
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Date of Issue
1966
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Abstract
This paper develops a procedure for locating profit maximizing operating conditions when
the input variables are subject to control by the experimenter and observations on physical
output may be taken subject to experimental error at any combination of these inputs. This
procedure uses the Box-Wilson technique, a well-known statistical search procedure, together
with the pria of the output and the cost of the inputs so as to search for maximum profit points
rather than maximum output points.
The result is an experimental search method which maximizes profit when the functional
form of the physical response surface (production function) is unknown. In this case, of course,
standard mathematical programming models are of no use in the absence of the required
functional forms. This functional form, though unknown, is determined by the existing
investment in capital equipment.
These procedures, like the Box-Wilson technique, are more likely to be applicable to flow
process reactor systems in the chemical and oil industries, but are certainly not limited to such
applications.
Type
Article
Description
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Department
Defense Management Program
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Citation
The International Journal of Production Research, Volume 4, Number 3, (1966)
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.