Constrained Assortment Optimization Problem under the Multilevel Nested Logit Model
Yanqiao Wang, Zuo-Jun Max Shen
Production and Operations Management · 2021 · Volume 30 · Issue 10
Abstract
We study the choice-based constrained assortment optimization problem under the multilevel nested logit model with a no-purchase option in every choice stage. For this problem, each candidate product is associated with a fixed profit. The goal is to identify the optimal assortment satisfying a cardinality constraint to maximize the expected profit per customer. There is a cardinality limitation imposed on nodes in the second lowest level. A polynomial-time algorithm with computational complexityO(nmax{m,k}) is provided to locate the optimal assortment for them-level nested logit model withnproducts, wherekis the maximum number of products within any node in levelm− 1.
Keywords
multilevel nested logit model, no-purchase options, cardinality constraints
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