A Review of Choice Modeling in the Marketing-Operations Management Interface

Abstract

The operations management discipline has made substantial progress developing analytical models to help firms make tactical and strategic decisions (e.g., inventory control, assortment planning). The application of these models to real contexts requires several inputs, such as an estimate of the benefits and costs of various levels of the operational decision under study. It is often the case that the associated benefits depend on how customers react to changes in the operational decisions being modeled. This in turn requires an empirical validation of the consumer model that serves as an input when making operation decisions. Bringing together researchers from economics, marketing and operations management, this paper reviews and discusses recent findings in terms of modeling and empirically validating consumer choices in response to operational decisions. We structure this discussion along four major operational decisions and issues: product variety (including inventory and assortment), service capacity, pricing and supply chain coordination. For each of these areas, we review recent work and identify challenges that we believe are important to address in future research aimed at connecting operations management research to practice.

Keywords: Choice Models, Marketing-Operations Interface, Econometrics, Empirical Research