IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v248y2016i1p219-233.html
   My bibliography  Save this article

Optimal product line pricing in the presence of budget-constrained consumers

Author

Listed:
  • Mayer, Stefan
  • Steinhardt, Claudius

Abstract

The product line pricing problem is generally defined as a seller's task to determine the optimal prices for each product in a product line while accounting for both demand-side and supply-side restrictions. In this paper, we contribute to the existing literature by incorporating consumers’ budget considerations into the seller's optimisation problem. Despite playing an important role in many applications, such as the pricing of tickets for sporting or theatre seasons, budget constraints have not been considered in the academic literature in the context of product line pricing to date.

Suggested Citation

  • Mayer, Stefan & Steinhardt, Claudius, 2016. "Optimal product line pricing in the presence of budget-constrained consumers," European Journal of Operational Research, Elsevier, vol. 248(1), pages 219-233.
    • Handle: RePEc:eee:ejores:v:248:y:2016:i:1:p:219-233
    DOI: 10.1016/j.ejor.2015.07.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221715006396
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2015.07.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mayer, Stefan & Klein, Robert & Seiermann, Stephanie, 2013. "A simulation-based approach to price optimisation of the mixed bundling problem with capacity constraints," International Journal of Production Economics, Elsevier, vol. 145(2), pages 584-598.
    2. Burkart, Wolfgang R. & Klein, Robert & Mayer, Stefan, 2012. "Product line pricing for services with capacity constraints and dynamic substitution," European Journal of Operational Research, Elsevier, vol. 219(2), pages 347-359.
    3. Gregory Dobson & Shlomo Kalish, 1988. "Positioning and Pricing a Product Line," Marketing Science, INFORMS, vol. 7(2), pages 107-125.
    4. Day, Jamison M. & Venkataramanan, M.A., 2006. "Profitability in product line pricing and composition with manufacturing commonalities," European Journal of Operational Research, Elsevier, vol. 175(3), pages 1782-1797, December.
    5. W. Bentley MacLeod, 1996. "Decision, Contract, and Emotion: Some Economics for a Complex and Confusing World," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 788-810, November.
    6. Kyle D. Chen & Warren H. Hausman, 2000. "Technical Note: Mathematical Properties of the Optimal Product Line Selection Problem Using Choice-Based Conjoint Analysis," Management Science, INFORMS, vol. 46(2), pages 327-332, February.
    7. Paul E. Green & Abba M. Krieger, 1985. "Models and Heuristics for Product Line Selection," Marketing Science, INFORMS, vol. 4(1), pages 1-19.
    8. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    9. Klein, Robert, 2000. "Scheduling of resource constrained projects," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 1592, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    10. Kraus, Ursula G. & Yano, Candace Arai, 2003. "Product line selection and pricing under a share-of-surplus choice model," European Journal of Operational Research, Elsevier, vol. 150(3), pages 653-671, November.
    11. George B. Dantzig, 1957. "Discrete-Variable Extremum Problems," Operations Research, INFORMS, vol. 5(2), pages 266-288, April.
    12. Chakravarty, A. & Mild, A. & Taudes, A., 2013. "Bundling decisions in supply chains," European Journal of Operational Research, Elsevier, vol. 231(3), pages 617-630.
    13. Guillermo Gallego & Ruxian Wang, 2014. "Multiproduct Price Optimization and Competition Under the Nested Logit Model with Product-Differentiated Price Sensitivities," Operations Research, INFORMS, vol. 62(2), pages 450-461, April.
    14. Ward Hanson & Kipp Martin, 1996. "Optimizing Multinomial Logit Profit Functions," Management Science, INFORMS, vol. 42(7), pages 992-1003, July.
    15. Gregory Dobson & Shlomo Kalish, 1993. "Heuristics for Pricing and Positioning a Product-Line Using Conjoint and Cost Data," Management Science, INFORMS, vol. 39(2), pages 160-175, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Yusheng & Li, Yongjian & Xu, Shuangshuang, 2024. "Repositioning to sink: The pricing and quality decisions for product line considering the sinking market," European Journal of Operational Research, Elsevier, vol. 317(2), pages 578-591.
    2. Hossein Jahandideh & Julie Ward Drew & Filippo Balestrieri & Kevin McCardle, 2020. "Individualized Pricing for a Cloud Provider Hosting Interactive Applications," Service Science, INFORMS, vol. 12(4), pages 130-147, December.
    3. Moon, Ilkyeong & Park, Kun Soo & Hao, Jing & Kim, Dongwook, 2017. "Joint decisions on product line selection, purchasing, and pricing," European Journal of Operational Research, Elsevier, vol. 262(1), pages 207-216.
    4. Refael Hassin & Justo Puerto, 2024. "Pricing heterogeneous products to heterogeneous customers who buy sequentially," Annals of Operations Research, Springer, vol. 340(2), pages 863-890, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bechler, Georg & Steinhardt, Claudius & Mackert, Jochen & Klein, Robert, 2021. "Product line optimization in the presence of preferences for compromise alternatives," European Journal of Operational Research, Elsevier, vol. 288(3), pages 902-917.
    2. Burkart, Wolfgang R. & Klein, Robert & Mayer, Stefan, 2012. "Product line pricing for services with capacity constraints and dynamic substitution," European Journal of Operational Research, Elsevier, vol. 219(2), pages 347-359.
    3. Hongmin Li & Scott Webster & Gwangjae Yu, 2020. "Product Design Under Multinomial Logit Choices: Optimization of Quality and Prices in an Evolving Product Line," Manufacturing & Service Operations Management, INFORMS, vol. 22(5), pages 1011-1025, September.
    4. Andrade, Xavier & Guimarães, Luís & Figueira, Gonçalo, 2021. "Product line selection of fast-moving consumer goods," Omega, Elsevier, vol. 102(C).
    5. Schön, Cornelia, 2010. "On the product line selection problem under attraction choice models of consumer behavior," European Journal of Operational Research, Elsevier, vol. 206(1), pages 260-264, October.
    6. Moon, Ilkyeong & Park, Kun Soo & Hao, Jing & Kim, Dongwook, 2017. "Joint decisions on product line selection, purchasing, and pricing," European Journal of Operational Research, Elsevier, vol. 262(1), pages 207-216.
    7. Dimitris Bertsimas & Velibor V. Mišić, 2017. "Robust Product Line Design," Operations Research, INFORMS, vol. 65(1), pages 19-37, February.
    8. Kraus, Ursula G. & Yano, Candace Arai, 2003. "Product line selection and pricing under a share-of-surplus choice model," European Journal of Operational Research, Elsevier, vol. 150(3), pages 653-671, November.
    9. Cornelia Schön, 2010. "On the Optimal Product Line Selection Problem with Price Discrimination," Management Science, INFORMS, vol. 56(5), pages 896-902, May.
    10. Dimitris Bertsimas & Velibor V. Mišić, 2017. "Robust Product Line Design," Operations Research, INFORMS, vol. 65(1), pages 19-37, February.
    11. Winfried Steiner & Harald Hruschka, 2002. "A Probabilistic One-Step Approach to the Optimal Product Line Design Problem Using Conjoint and Cost Data," Review of Marketing Science Working Papers 1-4-1003, Berkeley Electronic Press.
    12. Tan Wang & Genaro Gutierrez, 2022. "Robust Product Line Design by Protecting the Downside While Minding the Upside," Production and Operations Management, Production and Operations Management Society, vol. 31(1), pages 194-217, January.
    13. Day, Jamison M. & Venkataramanan, M.A., 2006. "Profitability in product line pricing and composition with manufacturing commonalities," European Journal of Operational Research, Elsevier, vol. 175(3), pages 1782-1797, December.
    14. Dimitris Bertsimas & Velibor V. Mišić, 2019. "Exact First-Choice Product Line Optimization," Operations Research, INFORMS, vol. 67(3), pages 651-670, May.
    15. Juan José Miranda Bront & Isabel Méndez-Díaz & Gustavo Vulcano, 2009. "A Column Generation Algorithm for Choice-Based Network Revenue Management," Operations Research, INFORMS, vol. 57(3), pages 769-784, June.
    16. Michalek, Jeremy J. & Ebbes, Peter & Adigüzel, Feray & Feinberg, Fred M. & Papalambros, Panos Y., 2011. "Enhancing marketing with engineering: Optimal product line design for heterogeneous markets," International Journal of Research in Marketing, Elsevier, vol. 28(1), pages 1-12.
    17. Maoqi Liu & Li Zheng & Changchun Liu & Zhi‐Hai Zhang, 2023. "From share of choice to buyers' welfare maximization: Bridging the gap through distributionally robust optimization," Production and Operations Management, Production and Operations Management Society, vol. 32(4), pages 1205-1222, April.
    18. Tallys H. Yunes & Dominic Napolitano & Alan Scheller-Wolf & Sridhar Tayur, 2007. "Building Efficient Product Portfolios at John Deere and Company," Operations Research, INFORMS, vol. 55(4), pages 615-629, August.
    19. Domínguez, Concepción & Labbé, Martine & Marín, Alfredo, 2021. "The rank pricing problem with ties," European Journal of Operational Research, Elsevier, vol. 294(2), pages 492-506.
    20. Wilhelm, Wilbert E. & Xu, Kaihong, 2002. "Prescribing product upgrades, prices and production levels over time in a stochastic environment," European Journal of Operational Research, Elsevier, vol. 138(3), pages 601-621, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:248:y:2016:i:1:p:219-233. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.