a market discovery algorithm to estimate a general class of nonparametric choice models we propose an approach for estimating customer preferences for a set of substitutable products using only sales transactions and product availability data the underlying demand framework combines a general nonparametric discrete choice model with a bernoulli process of arrivals over time the choice model is defined by a discrete probability mass function pmf on a set of possible preference rankings of alternatives and it is compatible with any random utility model an arriving customer is assumed to purchase the available option that ranks highest in her preference list the problem we address is how to jointly estimate the arrival rate and the pmf of the rank based choice model under a maximum likelihood criterion since the potential number of customer types is factorial we propose a market discovery algorithm that starts with a parsimonious set of types and enlarge it by automatically generating new types that increase the likelihood value numerical experiments confirm the potential of our proposal for a realistic data set in the hospitality industry our approach improves the root mean square errors between predicted and observed purchases computed under independent demand model estimates by 67 to 93 this paper was accepted by serguei netessine operations management

expectations about voter choices a comment the only essential differences in the examples analyzed above are in the assumptions that are used to derive or directly specify the choice behavior that the candidates expect from any given voter conditional on his utility function when the central behavioral assumption from the traditional models was used the equilibrium was a median outcome a conclusion directly analogous to what happens in the corresponding unidimensional traditional voting models when the central behavioral assumptions from the probabilistic voting model developed in coughlin and nitzan 1981 were used the equilibrium was at the maximum of the expected log utility function a conclusion directly analogous to what happens in the model in coughlin and nitzan 1981 indeed it was only when the corresponding assumptions from ledyard 1984 were used i e the particular assumptions that ledyard used to derive the choice behavior that the candidates expect from any given voter conditional on his utility function that the conclusions were substantially different from the conclusions derived from earlier models this reflects the important role these assumptions play in making ledyard s conclusions about candidate strategies substantially different from earlier results in the literature on spatial models of elections

a nonparametric approach to modeling choice with limited data choice models today are ubiquitous across a range of applications in operations and marketing real world implementations of many of these models face the formidable stumbling block of simply identifying the right model of choice to use because models of choice are inherently high dimensional objects the typical approach to dealing with this problem is positing a priori a parametric model that one believes adequately captures choice behavior this approach can be substantially suboptimal in scenarios where one cares about using the choice model learned to make fine grained predictions one must contend with the risks of mis specification and overfitting underfitting thus motivated we visit the following problem for a generic model of consumer choice namely distributions over preference lists and a limited amount of data on how consumers actually make decisions such as marginal information about these distributions how may one predict revenues from offering a particular assortment of choices an outcome of our investigation is a nonparametric approach in which the data automatically select the right choice model for revenue predictions the approach is practical using a data set consisting of automobile sales transaction data from a major u s automaker our method demonstrates a 20 improvement in prediction accuracy over state of the art benchmark models this improvement can translate into a 10 increase in revenues from optimizing the offer set we also address a number of theoretical issues among them a qualitative examination of the choice models implicitly learned by the approach we believe that this paper takes a step toward automating the crucial task of choice model selection this paper was accepted by yossi aviv operations management

blind network revenue management we consider a general class of network revenue management problems where mean demand at each point in time is determined by a vector of prices and the objective is to dynamically adjust these prices so as to maximize expected revenues over a finite sales horizon a salient feature of our problem is that the decision maker can only observe realized demand over time but does not know the underlying demand function that maps prices into instantaneous demand rate we introduce a family of blind pricing policies that are designed to balance trade offs between exploration demand learning and exploitation pricing to optimize revenues we derive bounds on the revenue loss incurred by said policies in comparison to the optimal dynamic pricing policy that knows the demand function a priori and we prove that asymptotically as the volume of sales increases this gap shrinks to zero

analytical solutions to the dynamic pricing problem for time normalized revenue abstract in this work we consider dynamic pricing for the case of continuous replenishment an essential ingredient in such a formulation is the use of time normalized revenue or profit function in other words revenue or profit per unit time this provides the incentive to sell many items in the shortest time and of course at a high price moreover for most firms what matters most is how much revenue or profit is achieved in a certain time frame for example per year this changes the problem qualitatively and methodologically we develop a new dynamic pricing model for this formulation we derive an analytical solution to the pricing problem in the form of a simple to solve ordinary differential equation ode equation the trajectory of this ode gives the optimal pricing curve unlike many of the models existing in the literature that rely on computationally demanding dynamic programming type solutions our model is relatively simple to solve also we apply the derived equation to two commonly used price demand functions the exponential and the power functions and derive closed form pricing curves for these functions

surplus maximization and optimality i identify assumptions under which policies that maximize expected surplus are pareto optimal even when expected consumer surplus does not even locally represent preferences over price income lotteries besides the oft made partial equilibrium assumptions that only one price varies and that income changes do not aect demand the two other assumptions are that every consumer s indirect utility function is supermodular in price and income and policies order prices by a single crossing property supermodularity holds precisely if relative risk aversion exceeds the income elasticity of demand a mild condition the single crossing property appears strong but holds in many applications that use expected surplus

exiting behavior under tiebout conditions towards a predictive model the paper briefly reviews recent research that adapts and extends the tiebout model of residential choice paying special attention to those studies which utilize hirschman s exit voice and loyalty model the paper argues that these are theoretically and empirically flawed since they do not take account of tiebout rational intra jurisdictional moves but concentrate upon potential exiting behavior the article then tests the importance of the inter intra jurisdictional distinction using a logit model of factors using data from the 1990 economic and social research council mobility study ecsrcms of london finding weak results from this analysis the article then offers a more powerful test of factors predicting a move to jurisdictions with preferable tax rates

a note on small income effects this note provides an alternative sufficient condition for the small income effect result that is first shown by vives small income effects a marshallian theory of consumer surplus and downward sloping demand rev econ stud 54 1 1987 87 103 the condition is stated by ordinal terms only whereas vives assumes cardinal properties of utility representation second as its application we provide a sufficient condition for the preference being asymptotically quasi linear in a two good economy where the second good is a composition of a large number of goods

revenue management with limited demand information in this paper we consider the classical multifare single resource leg problem in revenue management for the case where demand information is limited our approach employs a competitive analysis which guarantees a certain performance level under all possible demand scenarios the only information required about the demand for each fare class is lower and upper bounds we consider both competitive ratio and absolute regret performance criteria for both performance criteria we derive the best possible static policies which employ booking limits that remain constant throughout the booking horizon the optimal policies have the form of nested booking limits dynamic policies which employ booking limits that may be adjusted at any time based on the history of bookings are also obtained we provide extensive computational experiments and compare our methods to existing ones the results of the experiments demonstrate the effectiveness of these new robust methods

the effect of the social welfare system on metropolitan migration in the us by income group gender and family structure this research paper addresses some important issues regarding out migration from and in migration to metropolitan areas in the u s particularly the effect of the social welfare system on migration decisions the primary focus is on migration by income group poor versus non poor with a secondary focus on how gender and family status relate to migration the results provide only very weak support for the hypothesis that social welfare benefits influence out migration decisions only of non poor female headed households but moderate support for the effect of such benefits on in migration decisions especially of low income and female headed households excerpt

heuristics for pricing and positioning a product line using conjoint and cost data designing and pricing a product line is the very essence of every business in recent years quantitative methods to assist managers in this task have been gaining in popularity conjoint analysis is already widely used to measure preferences for different product profiles and build market simulation models in the last few years several papers have been published that suggest how to optimally choose a product line based on such data we formalize this problem as a mathematical program where the objective of the firm is either profit or total welfare unlike alternative published approaches we introduce fixed and variable costs for each product profile the number of products to be introduced is endogenously determined on the basis of their desirability fixed and variable costs and in the case of profits their cannibalization effect on other products while the problem is difficult np complete we show that the maximum welfare problem is equivalent to the uncapacitated plant location problem which can be solved very efficiently using the greedy interchange heuristic based on past published experience with this problem and on simulations we perform we show that optimal or near optimal solutions are obtained in seconds for large problems we develop a new greedy heuristic for the profit problem and its application to simulated problems shows that it too runs quickly and with better performance than various alternatives and previously published heuristics we also show how the methodology can be applied taking existing products of both the firm and the competition into account

multi product pricing for electric power abstract this paper describes methods for determining the prices for a discrete set of interrelated products offered by a single supplier each product has a fixed marginal rate per unit the demand for each product depends upon the price levels of all the products and the supplier s cost function depends upon the demands for all the products for specific demand function forms methods are described for determining the prices that maximize a weighted sum of net revenue and consumer surplus

a taxonomy and research overview of perishable asset revenue management yield management overbooking and pricing this paper proposes the term perishable asset revenue management to denote the field that combines the areas of yield management overbooking and pricing for perishable assets after summarizing the characteristics common to problems in this field the paper discusses the objectives and constraints faced by decision makers then it offers a comprehensive taxonomy with 14 different elements and reviews the research that has been done related to each element finally it suggests some important areas of future research that can help bridge the gap between theory and application

small income effects a marshallian theory of consumer surplus and downward sloping demand we formalize the marshallian idea that when the proportion of income spent on any commodity is small then the income effects are small if n is the number of goods we show under certain assumptions on preferences and prices that the order of magnitude of the norm of the income derivative of demand is 1 n as a corollary we get that for the case of a single price change the percentage error in approximating the hicksian deadweight loss by its marshallian counterpart goes to zero at least at the rate 1 n and that demand is downward sloping for n large enough

new product pricing in quality sensitive markets this paper considers the problem of pricing a new product in a market having competing products of different qualities and market penetration levels as measured by the cumulative number of units sold each customer type selects his optimal product based on maximizing consumer surplus pricing policies for a new product are determined for the seller based on cumulative profit maximization without discounting an example is solved in detail for two demand function forms

a nonparametric approach to multiproduct pricing developed by general motors gm the auto choice advisor website http www autochoiceadvisor com recommends vehicles to consumers based on their requirements and budget constraints through the website gm has access to large quantities of data that reflect consumer preferences motivated by the availability of such data we formulate a nonparametric approach to multiproduct pricing we consider a class of models of consumer purchasing behavior each of which relates observed data on a consumers requirements and budget constraint to subsequent purchasing tendencies to price products we aim at optimizing prices with respect to a sample of consumer data we offer a bound on the sample size required for the resulting prices to be near optimal with respect to the true distribution of consumers the bound exhibits a dependence of o n log n on the number n of products being priced showing thatin terms of sample complexitythe approach is scalable to large numbers of products with regards to computational complexity we establish that computing optimal prices with respect to a sample of consumer data is np complete in the strong sense however when prices are constrained by a price ladderan ordering of prices defined prior to price determinationthe problem becomes one of maximizing a supermodular function with real valued variables it is not yet known whether this problem is np hard we provide a heuristic for our price ladder constrained problem together with encouraging computational results finally we apply our approach to a data set from the auto choice advisor website our analysis provides insights into the current pricing policy at gm and suggests enhancements that may lead to a more effective pricing strategy

welfare policies and migration of the poor in the united states an empirical note this paper has investigated the impact of geographic welfare benefit differentials upon migration in the united states unlike other related studies which typically focus upon black migration as a surrogate measure of migration of the poor the present study focuses directly upon migration of the poor per se a variety of reduced form estimates are provided the evidence strongly suggests that the net in migration of the poor is positively and significantly influenced by higher nominal afdc levels and by higher real afdc levels these findings support the welfare magnet hypothesis which alleges that relatively high welfare levels act to attract poor migrants moreover given that poor migrants are attracted non only by high nominal welfare levels but also by high real welfare levels an argument can be made for establishing geographically uniform real welfare benefit levels in the united states this uniformity presumably should act over the long run to eliminate the human resource distortions being caused by the currently prevailing welfare system

smallness of a commodity and partial equilibrium analysis partial equilibrium analysis has a conceptual dilemma that its object should be negligibly small in order to be free from income effect but then the consumer does not care for it and the notion of willingness to pay for it does not make sense in the setting of a continuum of commodities we propose a limiting procedure which transforms the general many commodity framework into a partial single commodity framework in the limit willingness to pay for a commodity is established as a density notion and it is shown to be free from income effect this pins down an exact relationship between general equilibrium analysis and partial equilibrium analysis

do the elderly vote with their feet this research explores whether the elderly vote with their feet by migrating to states with government policies that treat them favorably a theoretical model is presented that clarifies the effects of cost of living amenities and the public sector on migration decisions and that informs our empirical analysis using state level migration data from the 1990 census we estimate out migration and in migration equations that suggest that the public sector is an important determinant of elderly migration but in sometimes unexpected ways our results lend some support for the tiebout hypothesis but they also raise serious questions about the nature of the elderly s preferences for government policy

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines