This workflow shows how the flexible Recursive Loop would be used in a Commodity Market where two Competitors are trying to simultaneously find their Revenue Maximizing Price.
The Market used in this loop is originally based based upon the BB-113 Commodity Competitive Loop. But there the Competitors both attempted to simultaneously set Profit Maximizing Prices. In this workflow, the second Competitor will review the Pricing decision made by the first Competitor before setting their own new Price.
The results of this Market Simulation are uninteresting. But the use of Meta-Nodes and the introduction of Flow Variables are useful to understand, as is seeing how outer-loops work with inner-loops.
Starting with the first Competitor, Spacely Sprockets, the Loop checks whether raising or lowering the Price by 10% increases Revenue. The Loop continues until no further improvement is possible. These Prices are then pushed out into the Market.
Then the second Competitor, Cogswell Cogs, reviews the Price set by the first then also decides whether raising or lowering the Price by 10% increases Revenue. This sequence continues 10 times.
The two Products, Spacely Sprockets and Cogswell Cogs, along with the associated WTP Matrix, are defined by the Product Generator node.
The Simulate Market node calculates the starting Quantity, Revenue, and Profitability of both Products.
As the second Competitor, Cogswell Cogs, always has the opportunity to set a lower Price after it sees the Spacely Sprockets Price, the first Competitor Spacely Sprockets can never lower Price enough to catch up.
Inner Loop #1
The Spacely Sprockets Meta-Node contains the same loop from the workflow BB-121 Monopoly Optimization Loop.
This Quick-Form allows the user to set the ‘Price Experiment Adjustment’. This is the percentage increase/decrease in Price that is tested within the inner loop. It is set to 10% by default.
The value of Flow Variables can be seen in the ‘Flow Variables’ tab from within any output table. Here you can see the Price Experiment Adjustment Flow Variable set to 10%.
Inner Loop #2
The Cogswell Cogs Meta-Node also contains the same loop from the workflow BB-121 Monopoly Optimization Loop.
The Price trend for Cogswell Cogs (red) is always lower than the Price for Spacely Sprockets (blue) as Cogswell has the advantage of first seeing Spacely’s Price before setting its own lower Price.
The Revenue maximizing Prices will continue down below the $50 Cost as Revenue maximization takes no account of Cost.