In–Out Algorithm for assortment planning under a ranking-based consumer choice model

We consider a retailer’s assortment planning problem under a ranking-based consumer choice model. The retailer incurs a fixed carrying cost per product offered, a substitution penalty cost for each customer who does not purchase his first choice, and a penalty cost on lost sales. We develop an effec...

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Bibliographic Details
Published inOperations research letters Vol. 48; no. 3; pp. 309 - 316
Main Authors Honhon, Dorothee, Pan, Xiajun Amy, Jonnalagedda, Sreelata
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.05.2020
Subjects
Algorithm
Assortment planning
Ranking-based choice model
Retailing
Retailing
Assortment planning
Ranking-based choice model
Algorithm
Online AccessGet full text
ISSN0167-6377
1872-7468
DOI10.1016/j.orl.2020.03.005

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Summary:We consider a retailer’s assortment planning problem under a ranking-based consumer choice model. The retailer incurs a fixed carrying cost per product offered, a substitution penalty cost for each customer who does not purchase his first choice, and a penalty cost on lost sales. We develop an effective In–Out Algorithm to identify the optimal solution. The extensive numerical study shows that the algorithm performs well, and is more than 10,000 times faster than enumeration on problems with 20 products.
ISSN:0167-6377
1872-7468
DOI:10.1016/j.orl.2020.03.005