Avoiding Risks Related with Strategic Pricing in Virtual Enterprise Networks

In this chapter we describe an effort to capture market dynamics of consumer products via Agent-based Models and apply the findings in the context of risk management focused in Virtual Enterprise Networks. The developed tool can help significantly leverage risks associated with price wars, or other aggressive strategies the players in a given market may choose to follow. It can also significantly improve purchasing/procurement and production planning decisions by better estimating (for the short-term of course) the variability in demand that will be experienced by a new price for a given product, thus optimizing supply chain operations and minimizing the logistics risks often associated with marketing campaigns. Finally, the tool can also be used to estimate the short-term profitability and break-even point for a proposed new product introduced by a Virtual Enterprise in an existing market, information that greatly minimizes risks related to the introduction of new products in the market, and then to estimate the optimal introductory price for the new product.