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330 Resource allocation and negotiation problems
to perform the appropriate calculations. One package which has been
designed specifically for this purpose is EQUITY, which was developed
by the Decision Analysis unit at the London School of Economics (see
Barclay 3 ) and is now sold by Krysalis. This package has been used to
analyze the problem which we will consider in the first part of the
chapter and therefore much of the terminology which is associated with
EQUITY has been adopted here.
The second application which will be considered in this chapter relates
to problems where two parties are involved in negotiations. Typically,
these problems concern a number of issues. For example, in industrial
relations disputes, negotiations may involve such issues as pay, holidays
and length of the working day. By assessing, for each party, the relative
importance of these concerns and the values that they would attach to
particular outcomes of the negotiations, decision analysis can be used to
help the parties to attain a mutually beneficial settlement.
Both these applications rely heavily on the concepts of multi-attribute
value analysis, which were covered in Chapter 3, and the reader should
make sure that he or she is familiar with these ideas before proceeding.
In particular, it should be noted that we have assumed throughout the
chapter that the additive value model is appropriate. Though this is
likely to be the case for a very wide range of applications, because of
the simplicity and robustness of the model, there will, of course, be
some circumstances where decision makers’ preferences can only be
represented by a more complex model.
Modeling resource allocation problems
An illustrative problem
Consider the following problem which relates to a hypothetical English
furniture company. At the time of the analysis the company was selling
its products through 28 large showrooms which were situated on the
edges of cities and towns throughout the country. Following a rapid
expansion of sales in the mid-1980s the company’s market had been
divided into four sales regions, North, West, East and South, and a
manager had been made responsible for each. The North sales region,
with nine outlets, had accounted for about 30% of national sales in the
previous year, but the region had been economically depressed for some
time and the immediate prospects for an improvement in the position