Tractable Models and Algorithms for Assortment Planning with Product Costs

Published Papers
Kunnumkal, Sumit M., Martinez-de-Albeniz, Victor. (Forthcoming) "Tractable Models and Algorithms for Assortment Planning with Product Costs", Operations Research
Abstract:
Assortment planning under a logit demand model is a difficult problem when there are product specific costs associated with including products into the assortment. In this paper, we describe a tractable method to obtain an upper bound on the optimal expected profit. We provide performance guarantees on the upper bound obtained. Computational experiments reveal that our method can obtain significantly tighter bounds compared to benchmark methods. We describe how our method can be extended to incorporate additional constraints on the assortment or multiple customer segments.