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Constrained Assortment Optimization Problem under the Multilevel Nested Logit Model

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  • Yanqiao Wang
  • Zuo‐Jun Max Shen

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 complexity O(nmax{m, k}) is provided to locate the optimal assortment for the m‐level nested logit model with n products, where k is the maximum number of products within any node in level m − 1.

Suggested Citation

  • Yanqiao Wang & Zuo‐Jun Max Shen, 2021. "Constrained Assortment Optimization Problem under the Multilevel Nested Logit Model," Production and Operations Management, Production and Operations Management Society, vol. 30(10), pages 3467-3480, October.
    • Handle: RePEc:bla:popmgt:v:30:y:2021:i:10:p:3467-3480
    DOI: 10.1111/poms.13443
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    References listed on IDEAS

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