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On the Relationship Between Inventory Costs and Variety Benefits in Retail Assortments
Abstract
Consider a category of product variants distinguished by some attribute such as color or flavor. A retailer must construct an assortment for the category, i.e., select a subset variants to stock and determine purchase quantities for each offered variant. We analyze this problem using a multinomial logit model to describe the consumer choice process and a newsboy model to represent the retailer's inventory cost. We show that the optimal assortment has a simple structure and provide insights on how various factors affect the optimal level of assortment variety. We also develop a formal definition of the level of fashion in a category using the theory of majorization and examine its implications for category profits.
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Cited by
An Econometric Analysis of Inventory Turnover Performance in Retail Services
Gaur, V., Fisher, M. L., & Raman, A. (2005) · Management Science · doi:10.1287/mnsc.1040.0298 · Cited by 469
Centralized and Competitive Inventory Models with Demand Substitution
Netessine, S., & Rudi, N. (2003) · Operations Research · doi:10.1287/opre.51.2.329.12788 · Cited by 435
Dynamic Pricing and Inventory Control of Substitute Products
Dong, L., Kouvelis, P., & Tian, Z. (2009) · Manufacturing & Service Operations Management · doi:10.1287/msom.1080.0221 · Cited by 311
An empirical analysis of inventory turnover behaviour in Greek retail sector: 2000–2005
Kolias, G. D., Dimelis, S. P., & Filios, V. P. (2011) · International Journal of Production Economics · doi:10.1016/j.ijpe.2010.04.026 · Cited by 76
Optimization Beyond Prediction: Prescriptive Price Optimization
Ito, S., & Fujimaki, R. (2017) · Proceedings of the 23rd ACM SIGKDD International Conference on Knowledge Discovery and Data Mining · doi:10.1145/3097983.3098188 · Cited by 39
Metadata
- Authors
- Ryzin, G. V., & Mahajan, S.
- Venue
- Management Science
- Published
- 1999-11
- Volume
- 45
- Issue
- 11
- Pages
- 1496-1509
- ISSN
- 0025-1909 (ISSN-L)
- 1526-5501
- OpenAlex
- W2158777411
- Cited by
- 492
- References
- 0
- FWCI
- 4.77
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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