A stochastic linear programming modelling and solution approach for planning the supply of rewards in Loyalty Reward Programs

Yuheng Cao, Aaron L. Nsakanda and Moustapha Diaby

International Journal of Mathematics in Operational Research, 2012, vol. 4, issue 4, 400-421

Abstract: In this paper, we consider the problem of planning the supply of rewards in a Loyalty Reward Program (LRP). We formulate this problem as a two-stage stochastic linear program with simple recourse, and develop a new, sampling-based stochastic optimisation heuristic procedure for solving it. The proposed heuristic is general and can be applied in other contexts as well. Our computational experiments demonstrate the viability of the modelling and solution approaches for solving realistically-sized (large-scale) problems.

Keywords: stochastic linear programming; sample average approximation; heuristics; stochastic optimisation; LRP; loyalty reward programmes; rewards supply planning; modelling; marketing; consumer incentives; consumer rewards; purchase behaviour; motivation. (search for similar items in EconPapers)
Date: 2012
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