Pricing Multiple Products with the Multinomial Logit and Nested Logit Models: Concavity and Implications

Authors:
Hongmin Li;Woonghee Tim Huh
Affiliations:
W.P. Carey School of Business, Arizona State University, Tempe, Arizona 85287;Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada
Venue:
Manufacturing & Service Operations Management
Year:
2011

Citing 19
Cited 0

Optimizing multinomial logit profit functions

Management Science
Logit Demand Estimation Under Competitive Pricing Behavior: An Equilibrium Framework

Management Science
Technical Note: Mathematical Properties of the Optimal Product Line Selection Problem Using Choice-Based Conjoint Analysis

Management Science
Competitive Price Discrimination Strategies in a Vertical Channel Using Aggregate Retail Data

Management Science
Convex Optimization

Convex Optimization
A General Equilibrium Model for Industries with Price and Service Competition

Operations Research
Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Finite Horizon Case

Operations Research
Price Competition with the Attraction Demand Model: Existence of Unique Equilibrium and Its Stability

Manufacturing & Service Operations Management
Product Line Selection and Pricing with Modularity in Design

Manufacturing & Service Operations Management
Dynamic Pricing Strategies for Multiproduct Revenue Management Problems

Manufacturing & Service Operations Management
Category Management and Coordination in Retail Assortment Planning in the Presence of Basket Shopping Consumers

Management Science
A Static Approximation for Dynamic Demand Substitution with Applications in a Competitive Market

Operations Research
(s, S) Optimality in Joint Inventory-Pricing Control: An Alternate Approach

Operations Research
New Product Development Under Channel Acceptance

Marketing Science
On the Effects of Consumer Search and Firm Entry in a Multiproduct Competitive Market

Marketing Science
Dynamic Pricing and Inventory Control of Substitute Products

Manufacturing & Service Operations Management
Joint Dynamic Pricing of Multiple Perishable Products Under Consumer Choice

Management Science
TECHNICAL NOTE---A Comparison of Bertrand and Cournot Profits in Oligopolies with Differentiated Products

Operations Research
A nonnegative extension of the affine demand function and equilibrium analysis for multiproduct price competition

Operations Research Letters

Quantified Score

Hi-index	0.00

Visualization

Abstract

We consider the problem of pricing multiple differentiated products with the nested logit model and, as a special case, the multinomial logit model. We prove that concavity of the total profit function with respect to market share holds even when price sensitivity may vary with products. We use this result to analytically compare the optimal monopoly solution to oligopolistic equilibrium solutions. To demonstrate further applications of the concavity result, we consider several multiperiod dynamic models that incorporate the pricing of multiple products in the context of inventory control and revenue management, and establish structural results of the optimal policies.