Article ID: | iaor20127742 |
Volume: | 40 |
Issue: | 6 |
Start Page Number: | 492 |
End Page Number: | 497 |
Publication Date: | Nov 2012 |
Journal: | Operations Research Letters |
Authors: | Wang Ruxian |
Keywords: | retailing, simulation |
We consider an assortment and price optimization problem where a retailer chooses an assortment of competing products and determines their prices to maximize the total expected profit subject to a capacity constraint. Customers’ purchase behavior follows the multinomial logit choice model with general utility functions. This paper simplifies it to a problem of finding a unique fixed point of a single‐dimensional function and visualizes the assortment optimization process. An efficient algorithm to find the optimal assortment and prices is provided.