Optimizing E85 Fuel Prices Using a Simulation-Based Decision Support Tool
Open AccessThis Praxis pursues an optimized fuel pricing methodology that is applied specifically to E85 fuel. The proposed methodology aims to improve the E85 fuel pricing process by providing a decision support tool that assists in price selection. The objective is to increase profit from E85 sales without losing a statistically significant number of gallons sold. A gas stations own retail unleaded prices provide a useful proxy for competitive prices. This eliminates all reliance on external competitive pricing data. Over the course of 30 days this proposed decision support tool will be tested in an experiment involving 60 retail fuel sites. Participating retail sites are split into a control group and an experimental group. The E85 prices in the experimental group will be generated using the proposed decision support tool. On the other hand, the unleaded grades and the control group will continue to generate prices using their preexisting methodology. The results from the two groups can then be analyzed and compared to determine if the new methodology generates superior results. The results from the experiment demonstrate that the proposed decision support tool improves E85 profit performance at retail sites. The experimental group was able to outperform the control group by 11.23% on E85 fuel volume and 7.04% on E85 fuel profit. This is further backed up by statistically significant results in the hypothesis testing process.
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