Multi-Stage and Multi-Customer Assortment Optimization With Inventory Constraints

Abstract

We consider an assortment optimization problem where a customer chooses a single item from a sequence of sets shown to her, while limited inventories constrain the items offered to customers over time. In the special case where all of the assortments have size one, our problem captures the online stochastic matching with timeouts problem. For this problem, we derive a polynomial-time approximation algorithm which earns at least 1-ln(2-1/e), or 0.51, of the optimum. This improves upon the previous-best approximation ratio of 0.46, and furthermore, we show that it is tight. For the general assortment problem, we establish the first constant-factor approximation ratio of 0.09 for the case that different types of customers value items differently, and an approximation ratio of 0.15 for the case that different customers value each item the same. Our algorithms are based on rounding an LP relaxation for multi-stage assortment optimization, and improve upon previous randomized rounding schemes to derive the tight ratio of 1-ln(2-1/e).

Keywords: Assortment Optimization, Online Matching, Online Marketplaces, Online Advertising