Spring 2011 Seminar Series

DATE: May 5th
LOCATION: E62-550
TIME: 4:15pm
Reception immediately following in the same room

SPEAKER:
Paat Rusmevichientong

TITLE
Robust Assortment Optimization Under the Multinomial Logit Choice Model

ABSTRACT
We study robust formulations of assortment optimization problems under the multinomial logit choice model. In our formulations, the true parameters of the logit model are assumed to be unknown, and we represent the set of likely parameter values by a compact uncertainty set. The objective is to find an assortment that maximizes the worst case expected revenue over all parameter values in the uncertainty set. We consider both static and dynamic settings. The static model ignores inventory consideration, while in the dynamic problem, there is a limited initial inventory that must be allocated over time. We give a complete characterization of the optimal policy in both settings, show that it can be computed efficiently, and derive operational insights. Numerical experiments demonstrate that our robust approach is beneficial when there is a significant uncertainty in the parameter values.

 

This is a joint work with Huseyin Topaloglu (Cornell)