Optimal Testing Strategy For Product Design

Wei Wang Pengbo Zhang Apr 15 2009
4/15/2009 1

Outline • • • • Introduction Pandora’s Box Role of Learning in sequential testing More complicated testing strategy 4/15/2009 2 .

Introduction • Why are new product design testing needed? – Decreased market uncertainty – Optimal candidate solution • What are sacrificed? – Direct testing cost (Wind tunnel etc.) – Indirect opportunity cost (testing time) • How are tests carried out ? – Sequential – Parallel – Mixed • Optimal testing strategy needed! 4/15/2009 3 .

Pandora’s Problem • n closed boxes • Box i contains reward xi with distribution Fi(xi) independent of all others • x0 initial wealth to start • Cost ci to open box i with a time lag of ti • Benefits discounted at rate r • Pandora opens one box at each stage • She can choose to stop searching and collect at that time the maximum reward thus far uncovered • Wanted: A sequential decision rule that can maximize the expected discounted value 4/15/2009 4 .

Formulation 4/15/2009 5 .

. Sequential Testing of Product Designs: Implications for Learning. 2008 • Pandora’s Box assumes all testings (opening a box) are independent • Interactions between design attributes and similarities between design configurations • Outcome from testing one configuration relevant in understanding and predicting the performance of subsequent tests • Similar DP formulation with correlation/covariance matrix added to model transferable learning 4/15/2009 6 .Learning • Erat. S.. Kavadias S.

Formulation 4/15/2009 7 .

lower cost Good when cost per test is important 4/15/2009 8 . 2001 Parallel testing Proceeding more rapidly Good when lead time is important Sequential testing Learning.Testing Strategies • Loch et al. Parallel and sequential testing of design alternatives.

Formulation 4/15/2009 9 .

Formulation 4/15/2009 10 .

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