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Exact First-Choice Product Line Optimization

Author

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  • Dimitris Bertsimas

    (Sloan School of Management and Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

  • Velibor V. Mišić

    (Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095)

Abstract

Which products should a firm offer based on its customers’ preferences? This is the question posed in the problem of product line design, a well-studied and notoriously difficult problem that is central in marketing science. In “Exact First-Choice Product Line Optimization” by Dimitris Bertsimas and Velibor V. Mišić, the authors propose a new approach for solving this problem when segments of customers choose products according to a ranking. They propose a new mixed-integer optimization model of the problem, which they show to be tighter than prior formulations, and a solution approach based on Benders decomposition, which exploits the surprising fact that the subproblem can be solved efficiently for both integer and fractional master solutions. A well-known product line instance based on a conjoint data set of over 3,000 products and 300 respondents, which required a week of computation time to solve in prior work, is solved by the authors’ approach in just over 10 minutes.

Suggested Citation

  • Dimitris Bertsimas & Velibor V. Mišić, 2019. "Exact First-Choice Product Line Optimization," Operations Research, INFORMS, vol. 67(3), pages 651-670, May.
    • Handle: RePEc:inm:oropre:v:67:y:2019:i:3:p:651-670
    DOI: 10.1287/opre.2018.1825
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    References listed on IDEAS

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    3. Yi-Chun Chen & Dmitry Mitrofanov, 2023. "A Nonparametric Stochastic Set Model: Identification, Optimization, and Prediction," Papers 2302.04354, arXiv.org, revised Jul 2023.
    4. Andrade, Xavier & Guimarães, Luís & Figueira, Gonçalo, 2021. "Product line selection of fast-moving consumer goods," Omega, Elsevier, vol. 102(C).
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    6. 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.
    7. Kris Johnson Ferreira & Joel Goh, 2021. "Assortment Rotation and the Value of Concealment," Management Science, INFORMS, vol. 67(3), pages 1489-1507, March.

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