Constrained Assortment Optimization Problem under the Multilevel Nested Logit Model

Yanqiao Wang and Zuo‐Jun Max Shen

Production and Operations Management, 2021, vol. 30, issue 10, 3467-3480

Abstract: We study the choice‐based constrained assortment optimization problem under the multilevel nested logit model with a no‐purchase option in every choice stage. For this problem, each candidate product is associated with a fixed profit. The goal is to identify the optimal assortment satisfying a cardinality constraint to maximize the expected profit per customer. There is a cardinality limitation imposed on nodes in the second lowest level. A polynomial‐time algorithm with computational complexity O(nmax{m, k}) is provided to locate the optimal assortment for the m‐level nested logit model with n products, where k is the maximum number of products within any node in level m − 1.

Date: 2021
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