10.4121/12852824.v1
Ahmadreza Marandi
Ahmadreza
Marandi
0000-0003-4205-1167
Virginie Lurkin
Virginie
Lurkin
LiBiT algorithm to solve static pricing problems under mixed multinomial logit demand
4TU.ResearchData
2020
Dataset
Applied Mathematics
Econometrics
Numerical and Computational Mathematics
static multi-product pricing
mixed logit model
nonlinear optimization model
Branching Methods
convex optimization
Convex Relaxation
Time: 2020
Eindhoven University of Technology, Department of Industrial Engineering & Innovation Sciences, Operations, Planning, Accounting, and Control
2020-08-24
https://arxiv.org/abs/2005.07482
1
CC BY-NC 4.0
Price differentiation is a common strategy for many operators. We study a static multiproduct price optimization problem with demand given by a continuous mixed multinomial logit model. To solve this new problem, we design an efficient iterative optimization algorithm that asymptotically converges to the optimal solution. To this end, a linear optimization (LO) problem is formulated, based on the trust-region approach, to find a "good" feasible solution and approximate the problem from below. Another LO problem is designed using piecewise linear relaxations to approximate the optimization problem from above. Then, we develop a new branching method to tighten the optimality gap.