A branch-and-cut algorithm for the latent-class logit assortment problem

Authors
Méndez-Díaz, Isabel; Miranda Bront, Juan Jose; Vulcano, Gustavo; Zabala, Paula Lorena
Publication Year
2012
Language
English
Format
article
Status
Published version
Description
We study the product assortment problem of a retail operation that faces a stream of customers who are heterogeneous with respect to preferences. Each customer belongs to a market segment characterized by a consideration set that includes the alternatives viewed as options, and by the preference weights that the segment assigns to each of those alternatives. Upon arrival, he checks the offer set displayed by the firm, and either chooses one of those products or quits without purchasing according to a multinomial-logit (MNL) criterion. The firm's goal is to maximize the expected revenue extracted during a fixed time horizon. This problem also arises in the growing area of choice-based, network revenue management, where computational speed is a critical factor for the practical viability of a solution approach. This so-called latent-class, logit assortment problem is known to be NP-Hard. In this paper, we analyze unconstrained and constrained (i.e., with a limited number of products to display) versions of it, and propose a branch-and-cut algorithm that is computationally fast and leads to (nearly) optimal solutions.
Fil: Méndez-Díaz, Isabel. Universidad de Buenos Aires. Facultad de Ciencias Exactas y Naturales. Departamento de Computación; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Fil: Miranda Bront, Juan Jose. Universidad de Buenos Aires. Facultad de Ciencias Exactas y Naturales. Departamento de Computación; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Fil: Vulcano, Gustavo. Leonard N. Stern School of Business; Estados Unidos. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Fil: Zabala, Paula Lorena. Universidad de Buenos Aires. Facultad de Ciencias Exactas y Naturales. Departamento de Computación; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Subject
CHOICE BEHAVIOR
FRACTIONAL PROGRAMMING
INTEGER PROGRAMMING
MULTINOMIAL LOGIT
RETAIL OPERATIONS
REVENUE MANAGEMENT
Ciencias de la Computación
Ciencias de la Computación e Información
CIENCIAS NATURALES Y EXACTAS
Access level
Restricted access
License
https://creativecommons.org/licenses/by-nc-nd/2.5/ar/
Repository
CONICET Digital (CONICET)
Institution
Consejo Nacional de Investigaciones Científicas y Técnicas
OAI Identifier
oai:ri.conicet.gov.ar:11336/68177