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629. Pricing and Inventory Decisions for an Assortment under a Generalized Nested Logit Choice
Invited abstract in session TC-50: Assortment Management, stream Retail Operations.
Tuesday, 12:30-14:00Room: M2 (building: 101)
Authors (first author is the speaker)
| 1. | Bacel Maddah
|
| Industrial Engineering and Management, American University of Beirut | |
| 2. | Hussein Tarhini
|
| American University of Beirut |
Abstract
We consider joint inventory and pricing decisions of substitutable products in an assortment that are differentiated by some primary and secondary attributes captured by a nested logit consumer choice. The choice model we consider is characterized by nests having different price elasticity parameters and dissimilarity indices, which generalizes recent work. On the supply side, we consider a newsvendor-type setting under Normal demand which is generated from an approximation to a Poisson arrival process. Motivated by results in the literature on the ``riskless" case, which ignores inventory costs, we assume that the prices of all products in the assortment can be written as a function of a single decision variable. We verify that this simplifying assumption yield near-optimal results based on a detailed numerical study. We then analyze the properties of the expected profit at optimal inventory levels as a function of the pricing decision variable.
Keywords
- Marketing
- Revenue Management and Pricing
- Service Operations
Status: accepted
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