Capacitated Assortment and Price Optimization under the Multinomial Logit Model
Operations Research Letters, 40 (6) 492 - 497
7 Pages Posted: 25 Mar 2012 Last revised: 1 Oct 2014
Date Written: December 29, 2013
Abstract
We consider an assortment and price optimization problem where a retailer chooses an assortment of competing products and determines their prices to maximize the total expected profit subject to a capacity constraint. Customers’ purchase behavior follows the multinomial logit choice model with general utility functions. This paper simplifies it to a problem of finding a unique fixed point of a single-dimensional function and visualizes the assortment optimization process. An efficient algorithm to find the optimal assortment and prices is provided.
Keywords: multinomial logit model; assortment optimization; multi-product price optimization; efficient assortment
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Price Competition Under Mixed Multinomial Logit Demand Functions
By Margaret P. Pierson, Gad Allon, ...
-
The Value of Medicare Managed Care Plans and Their Prescription Drug Benefits
By Anne Hall
-
By Guillermo Gallego and Ruxian Wang
-
Joint Dynamic Pricing of Multiple Perishable Products Under Consumer Choice
By Yalcin Akcay, Harihara Prasad Natarajan, ...
-
The Exponomial Choice Model: A New Alternative for Assortment and Price Optimization
By Aydin Alptekinoglu and John H. Semple
-
Price Competition Based on Relative Prices
By Awi Federgruen and Lijian Lu