Academy of Mathematics and Systems Science, CAS
Colloquia & Seminars

Speaker:	卢立建，香港科技大学工商管理学院
Inviter:	姚大成
Title:	Efficient Frontier and Applications in Product Offering and Pricing
Language:	Chinese
Time & Venue:	2023.07.20 10:00-11:30 南楼N620
Abstract:	Problem definition: The joint assortment and pricing problem is notoriously challenging to solve, especially for large problems under various operational constraints arising from business practices. In this paper, we consider jointoptimization problems under the constrained logit choice models with product-differentiated price sensitivities in static, randomized and dynamic settings. Methodology/results: We develop a unified optimization methodology that applies efficient frontier and dimensional reduction and transforms the joint optimization into a single-variable problem with the aggregate resource consumption rate. The efficient frontier is employed to transform the nonconcave objective function equivalently into its concave counterpart. We show that the optimal prices are uniquely determined by the target adjusted markup. The mixed combinatorial optimization can be simplified by searching over efficient sets of polynomial size. In the randomized assortment and pricing problem where the product offer set and prices follow certain distribution, we show that randomization can further increase the total revenue to the exact efficient frontier that is the best possible solution which the static problem may fail to achieve. For dynamic joint product selection and pricing, we find that the optimal policy adopts a simple time-threshold structure that can be pre-computed. We also illustrate the robustness of our methodology by extending the analysis to general settings as well as to the nested logit model. Managerial implications: The proposed methodology contributes to the increasingly popular topic in retail management by significantly reducing the computational complexity of joint product offering and pricing under different constraints. Our results for the impacts of product set constraints and price bounds provide insightful guidance to practitioners on product offerings and pricing in various business scenarios.