Abstract

http://ssrn.com/abstract=2149344
 


 



Real-Time Optimization of Personalized Assortments


Negin Golrezaei


University of Southern California - Marshall School of Business

Hamid Nazerzadeh


University of Southern California - Marshall School of Business

Paat Rusmevichientong


University of Southern California - Marshall School of Business

February 1, 2014

Management Science, Forthcoming

Abstract:     
Motivated by the availability of real-time data on customer characteristics, we consider the problem of personalizing the assortment of products for each arriving customer. Using actual sales data from an online retailer, we demonstrate that personalization based on each customer's location can lead to over 10% improvements in revenue compared to a policy that treats all customers the same.

We propose a family of index-based policies that effectively coordinate the real-time assortment decisions with the backend supply chain constraints. We allow the demand process to be arbitrary and prove that our algorithms achieve an optimal competitive ratio. In addition, we show that our algorithms perform even better if the demand is known to be stationary. Our approach is also flexible and can be combined with existing methods in the literature, resulting in a hybrid algorithm that brings out the advantages of other methods while maintaining the worst-case performance guarantees.

Number of Pages in PDF File: 47

Keywords: personalization, assortment optimization, choice models, online algorithms

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Date posted: September 20, 2012 ; Last revised: March 6, 2014

Suggested Citation

Golrezaei, Negin and Nazerzadeh, Hamid and Rusmevichientong, Paat, Real-Time Optimization of Personalized Assortments (February 1, 2014). Management Science, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2149344 or http://dx.doi.org/10.2139/ssrn.2149344

Contact Information

Negin Golrezaei
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
Hamid Nazerzadeh (Contact Author)
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
Paat Rusmevichientong
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
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