Product line optimisation based on semiparametric choice model

Wei Qi, Xinggang Luo, Yang Yu and Jiafu Tang

International Journal of Production Research, 2020, vol. 58, issue 18, 5676-5692

Abstract: Consumer choice behaviour is important in the product line optimisation problem. The extant literature on product line optimisation is mostly based on traditional consumer choice models, such as the multinomial logit and multinomial probit models. These models either assume that the utility errors are independent from irrelevant alternatives (IIA) or are limited by complex calculation processes or pre-given, specific distributions of measuring errors. The marginal moment model (MMM), which is classified as a semiparametric choice model, does not require specific distributions of errors; thus, it can overcome the IIA shortcoming. This study focuses on the concavity of the profit functions of a product line optimisation model based on MMM. We prove that the profit function based on MMM is concave in market share under a monopoly or oligopoly. Numerical experiments show that the choice probabilities obtained from the MMM, multinomial logit, and multinomial probit models are similar although they are obtained under different assumptions. Experimental results under monopolistic, Cournot, and Bertrand competition based on MMM are compared. Some interesting managerial insights are summarised based on the sensitivity analysis of the various model parameters.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/00207543.2019.1656838 (text/html)
Access to full text is restricted to subscribers.

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:taf:tprsxx:v:58:y:2020:i:18:p:5676-5692

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TPRS20

DOI: 10.1080/00207543.2019.1656838

Access Statistics for this article

International Journal of Production Research is currently edited by Professor A. Dolgui

More articles in International Journal of Production Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().