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A unique optimization model for deterministic bundle pricing of two products with limited stock

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Listed:
  • Ali Azadeh

    (University of Tehran)

  • Hassan Songhori

    (University of Tehran)

  • Nima Salehi

    (University of Michigan)

Abstract

In this study a firm in a monopoly environment is considered. The firm sells two types of perishable products using a commodity bundling practice. This study aims to find the optimal strategy of selling these products. We determine whether they should be offered separately or in a bundle, define their optimal prices and determine the initial amount of the bundle which should be made from components with limited stocks. A benefit-lost cost in a case that the customer segment does not find their desirable product is considered along with a shortage cost in a case that the customer segment selects a product or the bundle but there is not enough of it to satisfy all of the customer segment demands. In this study several different customer segments with different behaviors and reservation prices are assumed. The problem is solved using the Mixed-Integer Non-Linear Programming solver in LINGO software and a Genetic Algorithm. Finally, the superiority of obtained model and results are presented. This is the first study to locate optimal strategy of selling two types of perishable products using a commodity bundling practice. This study introduces a new mathematical optimization model based on previous gaps. Moreover, it covers the significant gaps of previous studies with respect to both practical and theoretical aspects.

Suggested Citation

  • Ali Azadeh & Hassan Songhori & Nima Salehi, 2017. "A unique optimization model for deterministic bundle pricing of two products with limited stock," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(2), pages 1154-1160, November.
    • Handle: RePEc:spr:ijsaem:v:8:y:2017:i:2:d:10.1007_s13198-017-0581-0
    DOI: 10.1007/s13198-017-0581-0
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    References listed on IDEAS

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