Bacel Maddah
American University of Beirut
Lebanon
Dynamic Games and Applications Seminar
Pricing, Assortment, and Inventory Decisions under Nested Logit Demand and Equal Profit Margins
October 12, 2023
11:00 AM — 12:00 PM (Montreal time)
We consider the interdependent decisions on assortment, inventory and pricing of substitutable products under a nested logit consumer choice, and a single-period, newsvendor-type, supply setting. This applies to fashion goods. We assume that all products have equal profit margins. Under a Taylor series-type approximation, we derive several concavity properties of the expected profit function, and gain insights into the structure of the optimal solution. Our results allow developing an efficient, single-variable search, heuristic for jointly deciding on assortment, pricing, and inventory decisions. We argue that our approach continues to hold under more general consumer choice.