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

Ali Azadeh (), Hassan Songhori and Nima Salehi
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Ali Azadeh: University of Tehran
Hassan Songhori: University of Tehran
Nima Salehi: University of Michigan

International Journal of System Assurance Engineering and Management, 2017, vol. 8, issue 2, No 49, 1154-1160

Abstract: 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.

Keywords: Bundle pricing; Limited stocks; Degree of contingency; Customer demands; Reservation prices; Customer segments; Optimization; Mixed-Integer Non-Linear Programming; Genetic algorithm (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s13198-017-0581-0

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