THE SOPHISTICATED DECISION-MAKER - ALL WORK AND NO PAY

We consider the effect on profitability of using increasingly sophisti cated regression-based methods of estimating and interpreting the para meters of the demand curve facing the neoclassical firm that newly ent ers an existing product market. Through simulation it is shown that in this particular setting the differences in the firm's subsequent prof it performance over the range of the different methods are de minimus. The demands these methods make upon the decision maker, however, diff er substantially. These results prompt us to question whether comparab le results in alternative real-world settings might not be more pervas ive than we as theoreticians would like to believe is the ease. We spe culate that all too often the profit payoff from the use of even-more- sophisticated decision-making techniques Hill fail to justify the requ ired effort. And, further, that even managers who are well versed in s ophisticated decision-making procedures are not unlikely to find their talents stretched to the lmit well before they reach the point of dim inishing returns.