Product Assortment and Price Competition under Multinomial Logit Demand

• 成果类型: Article
• 署名作者: Besbes, Omar; Saure, Denis
• 署名单位: Columbia University; Universidad de Chile
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12402
• 发表日期: 2016
• 页码: 114-127
• 关键词: model; optimization; equilibrium; management; FIRMS

摘要

The role of assortment planning and pricing in shaping sales and profits of retailers is well documented and studied in monopolistic settings. However, such a role remains relatively unexplored in competitive environments. In this study, we study equilibrium behavior of competing retailers in two settings: (i) when prices are exogenously fixed, and retailers compete in assortments only; and (ii) when retailers compete jointly in assortment and prices. For this, we model consumer choice using a multinomial Logit, and assume that each retailer selects products from a predefined set, and faces a display constraint. We show that when the sets of products available to retailers do not overlap, there always exists one equilibrium that Pareto-dominates all others, and that such an outcome can be reached through an iterative process of best responses. A direct corollary of our results is that competition leads a firm to offer a broader set of products compared to when it is operating as a monopolist, and to broader offerings in the market compared to a centralized planner. When some products are available to all retailers, that is, assortments might overlap, we show that display constraints drive equilibrium existence properties.