What's new in shadowprice.com version 3.5. The good intentions.

shadowprice.com

a customer retention science tool.

To describe what we intend to do in program design and market strategy, we need to show something about what's possible.

Non-player Competitor Game Assignment and Player Price/Product Attributes are Chosen From... priceproductattributes

MARKET POWER MANIFESTATIONS

Free market.

All competitors assume competition will raise price.

All competitors assume that while raising price, competition will clluster around flat rates offered.

All competitors assume competition will lower price.

(Players) react to inside information about what the incumbent's price will be.

(Players) react to inside information about what another challenger's price will be.

(Players) anticipate merger with one other challenger.

(Players) anticipate merger with two other challengers.

All competitors form a cartel.

How were the beta tests already performed organized?

Beta test design intent was to keep things simple by considering only two service differentiation portfolios that had demonstrated their effectiveness in tests of previous releases of shadowprice.com. The player matched these portfolios to two sets of market power manifestation strategies selected:

Advertising with brand name TV spots
Reduced outages
Bundled electricity, water, and natural gas
2-year service contract with penalty for breaking

matched to

market power manifestation…
free market – weighted 1/3rd probable
all competitors assume that while raising price, competition will cluster around flat rates offered – weighted 1/6th probable
all competitors assume competition will lower price – weighted 1/6th probable
(player) anticipates merger with one other challenger – weighted 1/9th probable
(player) anticipates merger with two other challengers – weighted 1/9th probable
all competitors form a cartel – weighted 1/9 probable
Advertising with brand name TV spots
Reduced outages
2-way customer/utility datacom with appliance management for peak to base load shifting
Bundled electricity, water, and natural gas

matched to

all nine market power manifestation strategies – weighted 1/9th probable each.

Additionally, it employed the first portfolio to test the relative merit of product differentiation versus merger under the two base load power cost regimes, with market power manifestation 1 for going it alone and 7 for anticipated merger with (or acquisition by) one other challenger.

Beta-test design intent was to first run with low base load power cost, then to repeat the same games with high base load power cost.

[shadowprice.com presents players with difficult decision criteria for comparative portfolio assessment:

All competitors must win, and by the same rule. The economist’s rule for winning market solutions is Pareto Efficiency. In our simulator, Pareto Efficiency bears its traditional meaning that no competitor be made worse off. Relative to “starting” profits from our starting values module, solver profits reveal, as yet unexploited, money making opportunities.
The best solution the solver can give should punish outliers who would break from the pack. In oligopolistic markets, conformity is virtuous.

Starting prices mimic so-called Hayek-optima. They are purged of the influence of underlying wholesale electricity prices that differ by competitor and therefore reflect customer valuation of product attributes alone. The shadowprice.com autopilot topology-based-solver selects solutions which are nearest to the Nash cooperative game optimum. It does so because these solutions better reflect the intransigence of incumbent utilities and their customers than do other Pareto efficient volumetric solution criteria embodied in shadowprice.com prior to the development of autopilot. Because shadowprice.com autopilot eliminates the player’s ability to make decisions about which challenger’s price to follow and which challengers to select as merger or acquisition candidates, it levels the playing field created for comparing and contrasting incumbent versus challenger and player versus non-player performance.]

Beta-test design intent was to portray challengers to an incumbent as aggressive. That is, all should be assumed to advertise and implement two or more price/product attribute choices from the list of fifteen. (Fixed or flat rates offered by incumbents and challengers choosing either the performance-based fixed rate or 2-year service contract with penalty for breaking are about 25% lower under the low base load power cost regime than they are under the high base load power cost regime.)

Beta-test design intent was to portray the incumbent in two ways – as aggressive in its price/product design as challengers or as simply providing standard offer service. The latter includes TV spot advertising with PUC/PSC limits on the number of spots per month and state mandated energy conservation assistance.

Beta-test design intent was to include incumbent provision of no-frills direct access to wholesale power plus a mark-up for distribution and embedded cost recovery. For each game assignment, the no-frills wholesale power cost is randomly selected from the power costs confronted by the eight challengers to the incumbent. These wholesale power costs differ from one another. They also differ by choice of low or high base load power cost regime. The no-frills service occupies a challenger slot in the game competition.

Beta-test design intent was to depict a player who fears price wars and considers them imminent. He/she therefore weights the occurrence of a price war at 90% in the computation of batting averages for the player and LCOS, with the occurrence of price peace weighted at 10%. [shadowprice.com autopilot automatically computes batting averages for which the war versus peace weights are 75%/25%, 50%/50%, and 25%/75%. The batting average module charts the player-assigned weights for war and peace and its automatically computed weights in three dimensions – batting average for player and LCOS by game in series by war versus peace weights.] Player fears notwithstanding, price wars occur with certainty in market power manifestation 4, and with 50% probability in market power manifestations 1 and 5 through 8 – unless shadowprice.com fails to find Pareto efficient solutions for all competitors in repeated trials, and draws new game assignment seeds until Pareto efficiency is achieved under price peace.

Please tell me what Batting Average is again for the first time!

Batting Average is a survival metric for a non-incumbent electricity services provider. As in baseball, higher is better. In shadowprice.com, higher than the LCOS means your portfolio selection mattered: shadowprice.com solution values are based on cost, quality of service, and market power residing in the expectations and behavior of service providers.

Stay tuned for beta-test pictures created as we moved forward with our battle plan.

You can purchase Autopilot 3.5 on a 4 gigabyte memory stick and test your own favorite portfolio design and most likely market power manifestations where you reside.