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
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 a job opening that you would like to promote on SSRN?
By Anne Hall