research-article

On the Relationship Between Inventory Costs and Variety Benefits in Retail Assortments

Authors: Garrett van Ryzin, Siddharth MahajanAuthors Info & Claims

Management Science, Volume 45, Issue 11

Pages 1496 - 1509

https://doi.org/10.1287/mnsc.45.11.1496

Published: 01 November 1999 Publication History

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

Chen XKrishnamurthy AWang Y(2024)Robust Dynamic Assortment Optimization in the Presence of Outlier CustomersOperations Research10.1287/opre.2020.028172:3(999-1015)Online publication date: 1-May-2024
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Chen XMa WSimchi-Levi DXin L(2024)Assortment Planning for Recommendations at Checkout Under Inventory ConstraintsMathematics of Operations Research10.1287/moor.2023.135749:1(297-325)Online publication date: 1-Feb-2024
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Published In

cover image Management Science

Management Science Volume 45, Issue 11

November 1999

149 pages

ISSN:0025-1909

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© 1999 INFORMS.

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INFORMS

Linthicum, MD, United States

Publication History

Published: 01 November 1999

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Cited By

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https://dl.acm.org/doi/10.1287/opre.2020.0281
Li XLin HLiu F(2024)Should Only Popular Products Be Stocked? Warehouse Assortment Selection for E-Commerce CompaniesManufacturing & Service Operations Management10.1287/msom.2022.042826:4(1372-1386)Online publication date: 1-Jul-2024
https://dl.acm.org/doi/10.1287/msom.2022.0428
Chen XMa WSimchi-Levi DXin L(2024)Assortment Planning for Recommendations at Checkout Under Inventory ConstraintsMathematics of Operations Research10.1287/moor.2023.135749:1(297-325)Online publication date: 1-Feb-2024
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