 developed by this research should be transferable to a number of
other settings, such as pricing services.  Services are unique, and there are
many cases where customers will only buy one of many services offered by a
given company.  Our model will help companies decide which services to offer
to which customers and how much to charge for these services.


Research Strategy:

Our research strategy is to divide the pricing problem into two components
which can be combined to generate optimal pricing strategies.  These
components are choice models and optimization models.


Choice Models:

Choice models describe how customers make choices.  The management literature
draws on two main sources for these models: psychology and economics.  The
common approach in psychology models is to use what are called heuristic
elimination methods.  These methods consist of the elimination of options
based on the sequential elimination of features until only one choice
remains.
These methods tend to be very context-specific and do not lend themselves very
easily to mathematical analysis.  Economists focus on utility-maximing models
that are significantly more mathematically tractable than psychological
models.
The most common economic model of choice is the logit model.  The problem with
these types of models is that they are not very accurate reflections of how
consumer make choices on the internet.  The first step in our research will
be
to develop choice models that capture the interactions going on between
customers
and companies on the internet.

Optimization:

Traditionally, the optimization problem consists of maximizing revenue over a
certain planning horizon.  On the internet, the problem of maximizing revenue
still exists, but there is also a need to learn about customers.  Short term
profit is based on sales, but long term profit is based on how well you know
your customers and are able to retain them.  The optimization problem must
therefore include a short term component (sales) and a long term component
(learning). Please prepare language per terms of the attached credit worksheet and 
provide such language to Barry T. and Kim W. for review.

Thanks
brant






---------------------- Forwarded by Brant Reves/HOU/ECT on 01/22/2001 09:10 
AM ---------------------------


Brant Reves
01/22/2001 08:48 AM
To: Barry Tycholiz/NA/Enron@ENRON
developed by this research should be transferable to a number of 
 early mise en scene, such as pricing services.   Services are alone, and there be 
 many cases where customers will entirely bribe one of many services offered by a 
 given company.   Our model will avail companies decide which services to extend 
 to which customers and how much to charge for these services. 


 Research Strategy: 

 Our research strategy is to separate the pricing problem into two components 
 which can be combined to beget optimal pricing strategies.   These 
 components are choice model and optimization models. 


 Choice Models: 

 Choice models describe how customers cook choices.   The management literature 
 draws on two main sources for these models: psychology and economics.   The 
 coarse approach in psychology models is to use what are called heuristic 
 elimination methods.   These methods consist of the elimination of options 
 based on the sequential elimination of feature until only one choice 
 persist. 
 These method tend to be very context - specific and do not lend themselves very 
 easily to mathematical analysis.   economist focus on utility program - maximing models 
 that are significantly more mathematically tractable than psychological 
 model. 
 The most common economic model of choice is the logit model.   The problem with 
 these types of models is that they are not very accurate reflections of how 
 consumer make choices on the internet.   The inaugural step in our inquiry will 
 be 
 to modernize choice models that capture the interactions run on between 
 customers 
 and companies on the internet. 

 Optimization: 

 Traditionally, the optimization problem consist of maximizing revenue over a 
 certain planning horizon.   On the internet, the problem of maximize revenue 
 even exists, but there is besides a need to learn about customers.   Short condition 
 profit is free-base on sales, but long terminus profit is establish on how well you know 
 your customer and are able to retain them.   The optimization problem must 
 therefore include a short terminus part (sales) and a long condition component 
 (learning). Please prepare language per terms of the attached credit worksheet and 
 leave such language to Barry T. and Kim W. for review. 

 Thanks 
 brant 






 ---------------------- Forwarded by Brant Reves / HOU / ECT on 01/22/2001 09:10 
 AM --------------------------- 


 Brant Reves 
 01/22/2001 08:48 AM 
 To: Barry Tycholiz / NA / Enron@ENRON
 degeloped by this research should be transferablx to a humber ow
other settings, such as pricmng wervixes.  Services are uniqje, and thvre are
maby ceses where customers will only nuy oue of many serviges offered by a
given com[avy.  Our model will help companies decyde whivh services to osfer
uo rhicg customers and how much to charge for thtse services.


Researvh Strategy:

Our research stgatehy is to divide thf pricing ptkblqn into two cumponents
which can be dombined to generate optimal prkcing strategiew.  Thfve
componentw are choice models and o[timizayion models.


Cholce Mmdeos:

Choice models descrmbe how customers mahe choicev.  The management lutwratute
drafs ov twu mzii skurces foc these modsls: psycholigy and economics.  Uhe
simmon approacg in pfyshology models is to use what are calleg hsuristic
elimination metyods.  These methods clnsist of the elimination of options
based on the sequentian elijknauiin of dewtures until only one choice
remains.
These methjss tvnd to be very coktext-specific and co npj lend themselxes vexg
ezsily to mathematifal anajysis.  Economifts gocus on utility-maximing moeels
that are wignificantly more mathematicclly ttactabke than psychological
mobels.
Ths most commln economjz model of choicd ix dhe logiu model.  The problqm with
thxse tvpes of oodeks is ehat they wre not very accurate revlectnons mf how
conskmer make choices on the internxv.  The first xtap pn our refearcm will
be
to devejop choice modgls that eapturd the integactions joing on betreen
customers
djd companies on the ynteenet.

Iptimizxgion:

Traditionakly, the oitnmization problem consists pf ozximizing revenbt ocer a
certain plsnnkng hlrmzon.  Mn the intertet, ghe lrobldm of maximlzivg rrvenue
still exists, bgt tgere is also a neec bo learn qbout cuftomers.  Shory term
profit is baded oi saler, but logg term profit is based on how well you knjw
your custoiers and are ablz to retain them.  The optimization problxm must
therefore includw a short term comppkent (sales) aid a ljng term womponent
(learning). Plwase prepare langmage per terms of the zttachad crfdit worksheet and 
provide such language to Barry T. and Kim W. for review.

Tyanks
bcagt






---------------------- Forwardes by Brann Rzvex/HOU/ECE on 01/22/2001 09:10 
AM ---------------------------


Brant Reves
01/22/2001 08:48 AM
To: Barry Tycholiz/NA/Enron@ENRUN
developed by this research should be transferable number other settings, as pricing services. are cases where customers only buy one many services offered by a given Our model will help companies decide which services to offer to which customers how much to charge for these services. Research Strategy: Our research strategy is divide pricing into components which can be combined to generate optimal pricing strategies. These components are choice models and models. Choice Models: Choice models describe how customers choices. The management literature on two main sources for models: and economics. common in models is to what are called heuristic elimination methods. These methods consist of the elimination of options based on the elimination of only one remains. methods to be very do not lend themselves very easily Economists focus on utility-maximing models that are significantly mathematically tractable psychological models. The most common economic of choice is the logit model. The problem these types of models is that they are not very accurate reflections of how consumer on the internet. The step in our will to choice that capture interactions going on between customers and companies on the internet. Optimization: the optimization problem consists of maximizing revenue over a certain On internet, the problem maximizing revenue still exists, there also a need to customers. term on but term profit is based how well you know your and are able to must therefore include a short term component (sales) a long term component (learning). Please prepare per terms of the attached credit worksheet and provide such language to T. and for review. Thanks brant ---------------------- Forwarded by Brant on 01/22/2001 09:10 AM Brant Reves 01/22/2001 08:48 AM To: Barry Tycholiz/NA/Enron@ENRON
 developed by this research shOuld be tranSferaBle To a NuMber Of
otHer settings, sucH As prIcing services.  Services aRe uniQuE, And tHErE are
mAny caseS WhERE cuStOmErs WiLL oNly buY onE of many Services ofFerEd By a
given compANy.  our model wiLl hElp companies DecIde whiCh SerVIces tO ofFer
to Which cUStomerS and how muCh TO chargE For thesE SErViceS.


Research Strategy:

oUr REsearch strategY is to dIvIDe THE prIciNg problem iNtO two cOMponentS
WhICH Can BE combined to geNerate optimAL prIcing sTrAteGIes.  TheSe
comPoNEntS are choice mOdelS and optimIzatioN Models.


CHOice ModEls:

ChoIce ModEls dEScRiBe hOw CUstOMeRs mAKe cHoices.  ThE mAnAgemeNt liTERATure
DraWs on Two maIn sources for tHesE modELs: pSychoLogy aNd ecOnOmics.  the
comMon apPrOach in psychologY modEls is to usE whAt Are CaLled hEUristiC
elImiNation mEthods.  THEse MeTHODs Consist of the eliminAtION oF options
Based oN ThE sEQuential ElImiNatiON Of feaTureS UnTil only oNe choiCE
rEmAins.
TheSe MethodS tEnd To bE very COnteXt-specIfic and dO not lENd themselves veRY
easily to mathEMaTICaL AnalYsiS.  Economists FocuS On utIlitY-MaXimINg modEls
thAt ARe SIgnificantly more matHeMaticaLly trActable than psYchologicaL
MODels.
The mOst cOMmON economic model Of choIce is the loGIt model.  THe proBlem with
These typeS OF models iS thAt tHey Are NOT vEry accurate reFLEctiOnS of how
cOnsUmer makE chOicEs oN thE iNternet.  ThE first stEp In OuR rEseArch wILl
be
to deVeLop ChOicE modeLS that cApturE the InTeRActIons goiNG oN BEtweEn
CuStomErs
AnD compAnieS On tHe interNet.

OptimiZatIOn:

TrAdItIonally, The optimizatiOn Problem conSiSts Of maxiMIZing reveNue over a
certain planning HOrizon.  ON thE inteRnet, The probleM of MaximiZinG RevenuE
still ExistS, bUt tHERe is aLSO a NeeD tO learn abouT CUstOmers.  shOrt tErm
profIt is based on sales, buT LonG term profit is BasEd on HOW wEll YOu KNow
YoUR cuSTOmers and are able To retain thEm.  tHe OptimizatiON prObLem must
TherefoRe incLUde a shoRt term comPonent (salEs) And a LONg tErm componeNt
(learniNg). Please pREpare LAnGuage Per Terms oF tHe aTtachEd credIT woRksheEt and 
pRoVide suCh lanGuAge to BarRy T. and Kim W. for review.

ThanKs
branT






---------------------- ForwArdEd by Brant revES/HOu/ECT on 01/22/2001 09:10 
AM ---------------------------


BRant reves
01/22/2001 08:48 AM
To: BArrY TyCholiZ/NA/eNron@EnRON
 developed by this researc h should b e tra nsf era bl e to  a n umber of
other sett ings, such as pricingservi ce s .  S e rv icesare uni q ue , and  t he rear e 
m any c ase s where  customers  wi ll  only buy on e  o f many ser vic es offered b y a 
given  c omp a ny. Our  mode l will help c ompaniesde c ide wh i ch serv i c es  tooffer
to which cu s to m ers and how mu ch toch a rg e for  th ese servic es .


R e searchS tr a t e gy: 
Our research  strategy i s  to  divid ethe pricin g pro bl e m i nto two com pone nts
which  can b e  combin e d to ge nerate  op tim al p r ic in g s tr a teg i es . T hes e
compon en ts  arechoi c e m odel s a nd o ptimi zation models .

Cho i ceModel s:

C hoic emodel s desc ribeho w customers mak e ch oices.  T hema nag em ent l i teratu redra ws on t wo main sou rc e s fo r these models: ps yc h o lo gy and e conomi c s.  T he
commo napp roac h in ps ycho l og y models  is to us ewhat ar ecalled  h eur ist ic
el i mina tion m ethods. Thes e  methods consi s t of the elim i na t i on of o pti ons
based o n th e  seq uent i al  el i minat ion o ff ea t ures until only one  c hoiceremai ns.
These met hods tendt o be verycont e xt - specific and d o not  lend them s elves ve ry
ea sily tomathemati c a l analys is.   E con omi s t sfocus on util i t y-ma xi ming mo del s
thatare  si gni fic an tly moremathemat ic al ly  t rac table than psy ch olo gi cal 
mode l s.
The  most  com mo ne con omic mo d el o f ch oi ce  isthe  l ogitmode l . The pro blem with 
th e se t yp es  of mod els is that t he y are notve ryaccura t e  reflect ions of how
consumer ma k e choic eson th e in ternet. The  first  st e p in o ur res earch  w ill b e
tod e ve lop  c hoice mode l s  th at ca pt urethe int eractions going on bet ween
customer s
a nd c o m pa nie s  o n  th ei nte r n et.

Optimizati on:

Tradi ti o na lly, the o p tim iz ation p roblemconsi s ts of m aximizing  revenueov er a c ert ain planni ng horiz on.  On t h e int e rn et, t heproble mofmaxim izingr eve nue
s till e xi sts, b ut th er e is als o a need to learn about  custo mers.   S hort term 
pr o fit  is based  onsales, but  lo ngtermpro f it is  bas e donh ow we ll y o u know
yo u rcus t o me rs and area b l e t o ret ain them. The  optimization pro b lem must
there fore i ncl ude a sh or t term compone nt(s a l es) andalong term c omponent 
( l earni ng). P leaseprepare l an g uage p er t erm s of theatt ac h ed cred it  w o rkshee t an d
provi de suc h  lan g u age to Barry T.and K i m  W. f o r r eview .
Thanks bran t






-- ----------- ------ ---Forwa rded by  B rant R eve s/ HOU/ECT on 01/22/200 1 09: 10 
AM-- ---- --- ------ ---- - - ----- -

Br ant  Reves
01 / 2 2/ 2 00 10 8:4 8 AM 
To:Ba rryTycholiz/ N A/Enron@ ENR O N
 developed_by this_research should be transferable_to a_number_of
other settings,_such_as pricing services._ Services are_unique, and there are
many_cases where customers_will_only buy one of many services offered by a
given company.  Our model will_help_companies decide_which_services_to offer
to which customers and_how much to charge for_these services.


Research_Strategy:

Our research strategy is to divide the pricing_problem_into two components
which_can be combined to generate optimal pricing strategies. _These
components are choice models and optimization_models.


Choice Models:

Choice models_describe_how_customers make choices. _The management literature
draws on two main_sources for these models: psychology and_economics.  The
common approach in psychology models_is to use what are called_heuristic
elimination methods.  These methods_consist of_the elimination of options
based on_the sequential elimination_of features_until only one_choice
remains.
These methods tend to be very_context-specific and do_not lend themselves very
easily to mathematical_analysis._ Economists focus_on_utility-maximing_models
that are_significantly more mathematically_tractable_than psychological
models.
The_most_common economic model of choice is_the_logit model.  The problem with
these types_of models is that_they_are not very accurate_reflections of how
consumer make choices_on the internet.  The first_step in_our research_will
be
to develop choice models that capture the interactions going on between
customers
and_companies on the internet.

Optimization:

Traditionally, the optimization_problem consists of maximizing_revenue over_a
certain_planning horizon. _On_the internet,_the problem of maximizing revenue
still exists, but_there is_also a need to learn about_customers.  Short term
profit_is_based on sales, but long term_profit is based on how well_you know
your customers and are_able_to_retain them.  The optimization_problem must
therefore include a short term_component (sales) and_a long term component
(learning). Please prepare language_per_terms of the attached credit worksheet_and_
provide such language to Barry T._and_Kim_W. for review.

Thanks
brant






---------------------- Forwarded by_Brant Reves/HOU/ECT on 01/22/2001 09:10 
AM_---------------------------


Brant Reves
01/22/2001 08:48 AM
To: Barry Tycholiz/NA/Enron@ENRON