Optimal Pricing for a Multinomial Logit Choice Model with Network Effects

2014 ◽  
Author(s):  
Chenhao Du ◽  
William Cooper ◽  
Zizhuo Wang
Keyword(s):  
Network Effects ◽  
Choice Model ◽  
Multinomial Logit ◽  
Optimal Pricing

Optimal Pricing for a Multinomial Logit Choice Model with Network Effects

2016 ◽  
Vol 64 (2) ◽  
pp. 441-455 ◽  
Author(s):  
Chenhao Du ◽  
William L. Cooper ◽  
Zizhuo Wang
Keyword(s):  
Network Effects ◽  
Choice Model ◽  
Multinomial Logit ◽  
Optimal Pricing

scholarly journals Integrating Dynamic Pricing and Inventory Control for Fresh Agriproduct under Multinomial Logit Choice

2018 ◽  
Vol 2018 ◽  
pp. 1-12
Author(s):  
Xiong-zhi Wang ◽  
Wenliang Zhou
Keyword(s):  
Dynamic Pricing ◽  
Programming Model ◽  
Choice Model ◽  
Multinomial Logit ◽  
Linear Ordering ◽  
Stochastic Dynamic ◽  
Inventory Problem ◽  
Numerical Illustration ◽  
Dynamic Stochastic ◽  
Joint Pricing

In this article, we investigate a joint pricing and inventory problem for a retailer selling fresh agriproducts (FAPs) with two-period shelf lifetime in a dynamic stochastic setting, where new and old FAPs are on sale simultaneously. At the beginning of each period the retailer makes ordering decision for new FAP and sets regular and discount price for new and old inventories, respectively. After demand realization, the expired leftover is disposed and unexpired inventory is carried to the next period, continuing selling. Unmet demand of all FAPs is backordered. The objective is to maximize the total expected discount profit over the whole planning horizon. We present a price-dependent, stochastic dynamic programming model taking into account zero lead time, linear ordering costs, inventory holding, and backlogging costs, as well as disposal cost. Considering the influence of the perishability, we integrate a Multinomial Logit (MNL) choice model to describe the consumer behavior on purchasing fresh or nonfresh product. By way of the inverse of the price vector, the original formulation can be transferred to be jointly concave and tractable. Finally we characterize the optimal policy and develop effective methods to solve the problem and conduct a simple numerical illustration.

Assortment Optimization under the Multi-Purchase Multinomial Logit Choice Model

2021 ◽  
Author(s):  
Jacob Feldman ◽  
Danny Segev ◽  
Huseyin Topaloglu ◽  
Laura Wagner ◽  
Yicheng Bai
Keyword(s):  
Choice Model ◽  
Multinomial Logit ◽  
Assortment Optimization

Optimal Policy for Dynamic Assortment Planning Under Multinomial Logit Models

2021 ◽  
Author(s):  
Xi Chen ◽  
Yining Wang ◽  
Yuan Zhou
Keyword(s):  
Choice Model ◽  
Current Knowledge ◽  
Search Algorithm ◽  
Multinomial Logit ◽  
Planning Problem ◽  
Assortment Planning ◽  
Substitutable Products ◽  
Dynamic Decisions ◽  
Mnl Model ◽  
Regret Bound

We study the dynamic assortment planning problem, where for each arriving customer, the seller offers an assortment of substitutable products and the customer makes the purchase among offered products according to an uncapacitated multinomial logit (MNL) model. Because all the utility parameters of the MNL model are unknown, the seller needs to simultaneously learn customers’ choice behavior and make dynamic decisions on assortments based on the current knowledge. The goal of the seller is to maximize the expected revenue, or, equivalently, to minimize the expected regret. Although dynamic assortment planning problem has received an increasing attention in revenue management, most existing policies require the estimation of mean utility for each product and the final regret usually involves the number of products [Formula: see text]. The optimal regret of the dynamic assortment planning problem under the most basic and popular choice model—the MNL model—is still open. By carefully analyzing a revenue potential function, we develop a trisection-based policy combined with adaptive confidence bound construction, which achieves an item-independent regret bound of [Formula: see text], where [Formula: see text] is the length of selling horizon. We further establish the matching lower bound result to show the optimality of our policy. There are two major advantages of the proposed policy. First, the regret of all our policies has no dependence on [Formula: see text]. Second, our policies are almost assumption-free: there is no assumption on mean utility nor any “separability” condition on the expected revenues for different assortments. We also extend our trisection search algorithm to capacitated MNL models and obtain the optimal regret [Formula: see text] (up to logrithmic factors) without any assumption on the mean utility parameters of items.

scholarly journals Multi-route choice modelling in a metropolitan context: A comparative analysis using Multinomial Logit and Fuzzy Logic based approaches

2020 ◽  
Vol 79 (ET.2020) ◽  
pp. 1-17
Author(s):  
Sowjanya Dhulipala
Keyword(s):  
Decision Making ◽  
Fuzzy Logic ◽  
Choice Model ◽  
Route Choice ◽  
Fuzzy Rule ◽  
Multinomial Logit ◽  
Choice Modelling ◽  
Choice Behaviour ◽  
Linguistic Rules ◽  
Mnl Model

Route choice plays a vital role in the traffic assignment and network building, as it involves decision making on part of riders. The vagueness in travellers’ perceptions of attributes of the available routes between any two locations adds to the complexities in modelling the route choice behaviour. Conventional Logit models fail to address the uncertainty in travellers’ perceptions of route characteristics (especially qualitative attributes, such as environmental effects), which can be better addressed through the theory of fuzzy sets and linguistic variables. This study thus attempts to model travellers’ route choice behaviour, using a fuzzy logic approach that is based on simple and logical ‘if-then’ linguistic rules. This approach takes into consideration the uncertainty in travellers’ perceptions of route characteristics, resembling humans’ decision-making process. Three attributes – travel time, traffic congestion, and road-side environment are adopted as factors driving people’s choice of routes, and three alternative routes between two typical locations in an Indian metropolitan city, Surat, are considered in the study. The approach to deal with multiple routes is shown by analyzing two-wheeler riders’ (e.g. motorcyclists’ and scooter drivers’) route choice behaviour during the peak-traffic time. Further, a Multinomial Logit (MNL) model is estimated, to enable a comparison of the two modelling approaches. The estimated Fuzzy Rule-Based Route Choice Model outperformed the conventional MNL model, accounting for the uncertain behaviour of travellers.

The Multinomial, Multiattribute Logit Choice Model

1979 ◽  
Vol 16 (1) ◽  
pp. 124-132 ◽  
Author(s):  
Dennis H. Gensch ◽  
Wilfred W. Recker
Keyword(s):  
Choice Model ◽  
Behavioral Model ◽  
Multinomial Logit ◽  
Choice Modeling ◽  
Cross Sectional ◽  
Individual Level ◽  
Multiattribute Choice ◽  
Regression Approach ◽  
The Difference ◽  
Sectional Analysis

The authors argue that for the cross-sectional multiattribute approach to choice modeling, the multinomial logit is theoretically and empirically superior to the more commonly used regression approach. Other choice methodologies also are discussed briefly in relation to logit. The difference between individual level (where regression is appropriate) and cross-sectional analysis is recognized. Most marketing managers, because of their research goals, will be using a cross-sectional approach. The derivation of the logit from an underlying behavioral model of choice is illustrated. It is this underlying behavioral model of choice that provides logit with several conceptual advantages for modeling a multiattribute choice structure.

Pricing Competition Under Specific Discrete Choice Models

2020 ◽  
Vol 37 (02) ◽  
pp. 2050008
Author(s):  
Farhad Etebari
Keyword(s):  
Discrete Choice ◽  
Logit Model ◽  
Choice Model ◽  
Public Information ◽  
Multinomial Logit Model ◽  
Multinomial Logit ◽  
Discrete Choice Models ◽  
Nested Logit ◽  
Nested Logit Model ◽  
Substitution Pattern

Recent developments of information technology have increased market’s competitive pressure and products’ prices turned to be paramount factor for customers’ choices. These challenges influence traditional revenue management models and force them to shift from quantity-based to price-based techniques and incorporate individuals’ decisions within optimization models during pricing process. Multinomial logit model is the simplest and most popular discrete choice model, which suffers from an independence of irrelevant alternatives limitation. Empirical results demonstrate inadequacy of this model for capturing choice probability in the itinerary share models. The nested logit model, which appeared a few years after the multinomial logit, incorporates more realistic substitution pattern by relaxing this limitation. In this paper, a model of game theory is developed for two firms which customers choose according to the nested logit model. It is assumed that the real-time inventory levels of all firms are public information and the existence of Nash equilibrium is demonstrated. The firms adapt their prices by market conditions in this competition. The numerical experiments indicate decreasing firm’s price level simultaneously with increasing correlation among alternatives’ utilities error terms in the nests.

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