Tractable Models and Algorithms for Assortment Planning with Product Costs

Kunnumkal, S and Mart´ınez-de-Alb´eniz, V (2016) Tractable Models and Algorithms for Assortment Planning with Product Costs. Project Report. Indian School of Business, Hyderabad. (Submitted)

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Abstract

Assortment planning under a logit demand model is a difficult problem when there are product-specific fixed costs. We develop a new continuous relaxation of the problem that is based on the parametrization of the problem on the total assortment attractiveness. This relaxation provides an upper bound and a heuristic integer solution, for which we develop performance guarantees. We analytically prove that it provides a close-to-optimal solution when products are homogeneous in terms of preference weights. Moreover, our formulation can be easily extended to incorporate additional constraints on the assortment, or multiple customer segments. Finally, we provide numerical experiments that show that our method yields tight upper bounds and performs competitively with respect to other approaches found in the literature.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Kunnumkal, Shttp://orcid.org/0000-0002-6832-0508
Item Type: Monograph (Project Report)
Uncontrolled Keywords: Assortment Planning,
Subjects: Business and Management
Applied Statistics and Computing
Depositing User: Veeramani R
Date Deposited: 06 Feb 2016 06:35
Last Modified: 06 Feb 2016 07:12
URI: http://eprints.exchange.isb.edu/id/eprint/469
Publisher URL: http://webprofesores.iese.edu/valbeniz/AssortmentC...
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