Product Line Design for a Distribution Channel
Marketing Science
Management of Multi-Item Retail Inventory Systems with Demand Substitution
Operations Research
A Modeling Framework for Category Assortment Planning
Manufacturing & Service Operations Management
Assortment Planning and Inventory Decisions Under a Locational Choice Model
Management Science
Buyer Search Costs and Endogenous Product Design
Marketing Science
Product Line Selection and Pricing with Modularity in Design
Manufacturing & Service Operations Management
Retail Assortment Planning in the Presence of Consumer Search
Manufacturing & Service Operations Management
Algorithmic Game Theory
Mass Customization vs. Mass Production: Variety and Price Competition
Manufacturing & Service Operations Management
Strategic Assortment Reduction by a Dominant Retailer
Marketing Science
A Column Generation Algorithm for Choice-Based Network Revenue Management
Operations Research
Product Variety and Endogenous Pricing with Evaluation Costs
Management Science
Product Line Pricing in a Supply Chain
Management Science
When More Alternatives Lead to Less Choice
Marketing Science
Retail Assortment Planning Under Category Captainship
Manufacturing & Service Operations Management
The Role of Component Commonality in Product Assortment Decisions
Manufacturing & Service Operations Management
Product and Price Competition with Satiation Effects
Management Science
Hi-index | 0.01 |
This paper studies assortment planning and pricing for a product category with heterogeneous product types from two brands. We model consumer choice using the nested multinomial logit framework with two different hierarchical structures: a brand-primary model in which consumers choose a brand first, then a product type in the chosen brand, and a type-primary model in which consumers choose a product type first, then a brand within that product type. We consider a centralized regime that finds the optimal solution for the whole category and a decentralized regime that finds a competitive equilibrium between two brands. We find that optimal and competitive assortments and prices have quite distinctive properties across different models. Specifically, with the brand-primary model, both the optimal and the competitive assortments for each brand consist of the most popular product types from the brand. With the type-primary choice model, the optimal and the competitive assortments for each brand may not always consist of the most popular product types of the brand. Instead, the overall assortment in the category consists of a set of most popular product types. The price of a product under the centralized regime can be characterized by a sum of a markup that is constant across all products and brands, its procurement cost, and its marginal operational cost, implying a lower price for more popular products. The markup may be different for each brand and product type under the decentralized regime, implying a higher price for brands with a larger market share. These properties of the assortments and prices can be used as effective guidelines for managers to identify and price the best assortments and to rule out nonoptimal assortments. Our results suggest that to offer the right set of products and prices, category and/or brand managers should create an assortment planning process that is aligned with the hierarchical choice process consumers commonly follow to make purchasing decisions. This paper was accepted by Pradeep Chintagunta and Preyas Desai, special issue editors. This paper was accepted by Pradeep Chintagunta and Preyas Desai, special issue editors.