Joint Optimization of Assortment Selection and Pricing under the Capacitated Multinomial Logit Choice Model with Product-Differentiated Price Sensitivities
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چکیده
Joint Optimization of Assortment Selection and Pricing under the Capacitated Multinomial Logit Choice Model with Product-Differentiated Price Sensitivities Ruxian Wang HP Laboratories HPL-2012-207 Multinomial Logit model; assortment optimization; multi-product price optimization Many firms face a problem to select an assortment of products and determine their prices to maximize the total profit subject to a capacity constraint. Customers' purchase behavior follows the Multinomial Logit choice model. Our analysis shows the capacity is always fully used and the nested structure is lost when price sensitivities are product-differentiated. We propose a nonrecursive polynomial-time algorithm for the joint assortment and multi-product price optimization. External Posting Date: September 21, 2012 [Fulltext] Approved for External Publication Internal Posting Date: September 21, 2012 [Fulltext] Copyright 2012 Hewlett-Packard Development Company, L.P. Joint Optimization of Assortment Selection and Pricing under the Capacitated Multinomial Logit Choice Model with Product-Differentiated Price Sensitivities Ruxian Wang Hewlett-Packard Laboratories, 1501 Page Mill Road, Palo Alto, California 94304, [email protected] Many firms face a problem to select an assortment of products and determine their prices to maximize the total profit subject to a capacity constraint. Customers’ purchase behavior follows the Multinomial Logit choice model. Our analysis shows the capacity is always fully used and the nested structure is lost when price sensitivities are product-differentiated. We propose a nonrecursive polynomial-time algorithm for the joint assortment and multi-product price optimization.
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