Estimation of Choice-Based Models Using Sales Data from a Single Firm

Jeffrey P. Newman (), Mark E. Ferguson (), Laurie A. Garrow () and Timothy L. Jacobs ()
Additional contact information
Jeffrey P. Newman: School of Civil and Environmental Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332
Mark E. Ferguson: Moore School of Business, University of South Carolina, Columbia, South Carolina 29208
Laurie A. Garrow: School of Civil and Environmental Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332
Timothy L. Jacobs: US Airways, Phoenix, Arizona 85034

Manufacturing & Service Operations Management, 2014, vol. 16, issue 2, 184-197

Abstract: We develop a parameter estimation routine for multinomial logit discrete choice models in which one alternative is completely censored, i.e., when one alternative is never observed to have been chosen in the estimation data set. Our method is based on decomposing the log-likelihood function into marginal and conditional components. Our method is computationally efficient, provides consistent parameter estimates, and can easily incorporate price and other product attributes. Simulations based on industry hotel data demonstrate the superior computational performance of our method over alternative estimation methods that are capable of estimating price effects. Because most existing revenue management choice-based optimization algorithms do not include price as a decision variable, our estimation procedure provides the inputs needed for more advanced product portfolio availability and price optimization models.

Keywords: choice-based revenue management; discrete choice modeling; censored alternatives; sampling of alternatives (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://dx.doi.org/10.1287/msom.2014.0475 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:16:y:2014:i:2:p:184-197

Access Statistics for this article

More articles in Manufacturing & Service Operations Management from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().