Article ID: | iaor201113122 |
Volume: | 20 |
Issue: | 5 |
Start Page Number: | 668 |
End Page Number: | 680 |
Publication Date: | Sep 2011 |
Journal: | Production and Operations Management |
Authors: | Kachani Soulaymane, Shmatov Kyrylo |
Keywords: | management, demand, heuristics, combinatorial optimization, optimization |
We address the problem of simultaneous pricing of a line of several products, both complementary products and substitutes, with a number of distinct price differentiation classes for each product (e.g., volume discounts, different distribution channels, and customer segments) in both monopolistic and oligopolistic settings. We provide a generic framework to tackle this problem, consider several families of demand models, and focus on a real-world case-study example. We propose an iterative relaxation algorithm, and state sufficient conditions for convergence of the algorithm. Using historical sales and price data from a retailer, we apply our solution algorithm to suggest optimal pricing, and report on numerical results.