optimizing multinomial logit profit functions the multinomial logit model is a standard approach for determining the probability of purchase in product line problems when the purchase probabilities are multiplied by product contribution margins the resulting profit function is generally nonconcave because of this standard nonlinear search procedures may terminate at a local optimum which is far from the global optimum we present a simple procedure designed to alleviate this problem the key idea of this procedure is to find a path of prices from the global optimum of a related but concave logit profit function to the global optimum of the true but nonconcave logit profit function

constrained assortment optimization for the nested logit model we study assortment optimization problems where customer choices are governed by the nested logit model and there are constraints on the set of products offered in each nest under the nested logit model the products are organized in nests each product in each nest has a fixed revenue associated with it the goal is to find a feasible set of products i e a feasible assortment to maximize the expected revenue per customer we consider cardinality and space constraints on the offered assortment which limit the number of products and the total space consumption of the products offered in each nest respectively we show that the optimal assortment under cardinality constraints can be obtained efficiently by solving a linear program the assortment optimization problem under space constraints is np hard we show how to obtain an assortment with a performance guarantee of 2 under space constraints this assortment also provides a performance guarantee of 1 1 when the space requirement of each produc

substitution effects in cvm values there is increasing recognition that statistical estimates of the average willingness to pay for environmental programs may be biased by the failure of respondents or of the statistical methodology to consider the effect of substitute programs and goods we design and implement a cvm survey that estimates the impact of substitution effects on the willingness to pay for an environmental program we find a statistically significant impact and suggest that the set of potential substitutes is very large

markups aggregation and inventory adjustment in this paper i suggest a unified explanation for two puzzles in the inventory literature first estimates of inventory speeds of adjustment in aggregate data are very small relative to the apparent rapid reaction of stocks to unanticipated variations in sales second estimates of inventory speeds of adjustment in firm level data are significantly higher than in aggregate data the paper develops a multisector model where inventories are held to avoid stockouts and price markups vary along the business cycle the omission of countercyclical markup variations from inventory targets introduces a downward bias in estimates of adjustment speeds obtained from partial adjustment models when the cyclicality of markups differs across sectors this downward bias is shown to be more severe with aggregate rather than firm level data similar results apply not only to inventories but also to labor and prices montercarlo simulations of a calibrated version of the model suggest that these biases are quantitatively significant

vertically summing public good demand curves an empirical comparison of economic versus political jurisdictions fiscal equivalence for efficient provision of a public good requires perfect correspondence between political and economic jurisdictions however the spatial extent of the economic jurisdiction is an empirical question drawing on four survey based valuation studies we measure the relative public good benefit gradient as a function of residential location from six natural resource public goods the results indicate commonly used state political jurisdictions reflect an average of 13 of total benefits in the economic jurisdiction although with a logarithmic form for distance the upper confidence interval of state benefits can include 100 for some species

a general attraction model and sales based linear program for network revenue management under customer choice this paper addresses two concerns with the state of the art in network revenue management with dependent demands the first concern is that the basic attraction model bam of which the multinomial logit mnl model is a special case tends to overestimate demand recapture in practice the second concern is that the choice based deterministic linear program currently in use to derive heuristics for the stochastic network revenue management problem has an exponential number of variables we introduce a generalized attraction model gam that allows for partial demand dependencies ranging from the bam to the independent demand model idm we also provide an axiomatic justification for the gam and a method to estimate its parameters as a choice model the gam is of practical interest because of its flexibility to adjust product specific recapture our second contribution is a new formulation called the sales based linear program sblp that works for the gam this formulation avoids the exponential number of variables in the earlier choice based network rm revenue management approaches and is essentially the same size as the well known lp formulation for the idm the sblp should be of interest to revenue managers because it makes choice based network rm problems tractable to solve in addition the sblp formulation yields new insights into the assortment problem that arises when capacities are infinite together these contributions move forward the state of the art for network revenue management under customer choice and competition

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

simulating the inventory cycle abstract simulations of the inventory cycle utilizing a model based on 84 interacting firms in 21 industries reveals that the ratio of the variance of sales to the variance of output is an unreliable indicator of how seriously firms attempt to smooth production or whether such efforts in the aggregate even out economic fluctuations it is also shown that the two slow estimates of the speed of adjustment reported in many econometric studies of united states data may result in part from aggregation bias rather than from limitations of the flexible accelerator model itself

the exponomial choice model a new alternative for assortment and price optimization we investigate the use of a canonical version of a discrete choice model due to daganzo 1979 daganzo c 1979 multinomial probit the theory and its application to demand forecasting academic press new york in optimal pricing and assortment planning in contrast to multinomial and nested logit the prevailing choice models used for optimizing prices and assortments this model assumes a negatively skewed distribution of consumer utilities an assumption we motivate by conceptual arguments as well as published work the choice probabilities in this model can be derived in closed form as an exponomial a linear function of exponential terms the pricing and assortment planning insights we obtain from the exponomial choice ec model differ from the literature in two important ways first the ec model allows variable markups in optimal prices that increase with expected utilities second when prices are exogenous the optimal assortment may exhibit leapfrogging in prices i e a product can be s

optimal pricing of correlated product options under the paired combinatorial logit model in this paper we study price optimization with price demand relationships captured by the paired combinatorial logit pcl model which overcomes restrictions of the well studied multinomial logit mnl and nested logit nl models the pcl model allows for choice correlation and like the nl model includes the mnl model as a special case compared to the nl models the pcl model does not restrict the sequence of the choice structure and allows for different covariances among all pairs of choices this additional flexibility in structure enables a more accurate representation of some choice settings and broadens its empirical applications hence it is of both theoretical and practical interests to extend the normative studies on the mnl and nl models to the pcl model and examine the pricing problem under this model due to cross nesting of choice alternatives the pricing problem under the pcl model poses a greater challenge than the mnl and nl models however using the concept of p matrix we are abl

estimation of distance decay functions to account for substitution and spatial heterogeneity in stated preference research in a site selection choice experiment various hypotheses are tested related to spatial heterogeneity in willingness to pay wtp for environmental improvements spatial heterogeneity is measured through distance decay effects substitute sites inside and outside the experiment s choice set and spatial trend variables we demonstrate that distance decay functions differ between users and nonusers and across study sites also the distance to substitutes outside the choice set explains spatial variation in wtp we show that further extending the model with spatial trend variables reveals additional spatial heterogeneity in choices accounting for spatial heterogeneity patterns results in significantly different wtp estimates for environmental improvements jel q25 q51

seasonality aggregation and the testing of the production smoothing hypothesis one of the leading hypotheses concerning the dynamics of production over time is the production smoothing hypothesis given a planning horizon which spans a number of production periods the firm need not produce in each period an amount equal to expected sales rather resorting to inventory accumulation and liquidation the firm may follow a production plan temporally smoother than the path of demand if firms faced with convex cost functions chose to smooth the rate of output in order to minimize costs one would expect to observe that the rate of output would vary less than the rate of sales with variations in inventory stocks absorbing some of the fluctuations in sales recently work on the testing of the production smoothing hypothesis has cast doubt on its empirical validity the evidence presented by alan blinder seems to indicate that the variance of production exceeds that of sales in seven out of eight two digit retail industries 1981 and in eighteen out of twenty two digit manufacturing industries 1983 and 1986 the purpose of this paper then is to examine the validity of such tests when seasonally adjusted aggregated data are used the evidence presented show that the relative size of the variances of the seasonally adjusted production and sales does not provide valid tests of the production smoothing hypothesis in addition aggregating over firms where the seasonal patterns differ may also distort tests of production smoothing blinder realized that the use of seasonally adjusted data may not provide an adequate test of the hypothesis stating had they been available i would have preferred to use data that were not seasonally adjusted since the production smoothing model presumably applies to seasonal fluctuations in sales however such data are not available 1983 fn 19 in this paper i focus on the cement industry because the unadjusted disaggregated data are available for the direct testing of the conjecture that aggregate seasonally adjusted data mask production smoothing phenomenon aggregate monthly data on five other industries will also be examined

modeling spatial patchiness and hot spots in stated preference willingness to pay stated preference analyses often impose strong assumptions regarding spatial welfare distributions that can influence the validity of welfare analysis and aggregation these include spatial homogeneity and continuous distance decay global assumptions such as these are increasingly questioned by non economics disciplines in favor of approaches that allow for local patchiness drawing from this literature this article proposes methods to identify and evaluate hot spots in stated preference welfare estimates using local indicators of spatial association methods are illustrated using geocoded choice experiment data addressing river restoration results suggest the presence of statistically significant non continuous patterns overlooked by current approaches

substitution effects in the valuation of multiple environmental programs abstract a theoretical framework for understanding substitution and complementary effects between environmental programs is derived a multiple program valuation function is specified and its structure analyzed a maximum likelihood estimator is derived to estimate the parameters of the valuation function using referendum type contingent valuation data the empirical analysis shows that the conventional benefit aggregation approach of independent valuation and summation overstates the benefits of two and three program policies by an average of 24 and 54 respectively

the aggregation of environmental benefit values welfare measures distance decay and total wtp abstract we review the literature regarding the aggregation of benefit value estimates for non market goods two case studies are presented through which we develop an approach to aggregation which applies the spatial analytic capabilities of a geographical information system to combine geo referenced physical census and survey data to estimate a spatially sensitive valuation function these case studies show that the common reliance upon political rather than economic jurisdictions and the use of sample mean values within the aggregation process are liable to lead to significant errors in resultant values we also highlight the fact that for resources with use values then we should expect overall values to reduce with increasing distance from such sites but that changes in the choice of welfare measure will determine whether such distance decay is to be expected within values stated by those who are presently non users the paper concludes by providing recommendations for future improvements to the methodology

the effect of distance on willingness to pay values a case study of wetlands and salmon in california most contingent valuation studies in the literature utilized a pre determined geographic market area for their sample frame in other words they did not include variables that would measure the extent of the geographic areas over which to aggregate willingness to pay these studies implicitly assumed that the effects of geographic distance were moot an assumption that could have led to an understatement of the aggregate benefit values computed in these studies the overall goal of this study was to determine if distance affects willingness to pay for public goods with large non use values the data used came from a contingent valuation study regarding the san joaquin valley ca respondents were asked about their willingness to pay wtp for three proposed programs designed to reduce various environmental problems in the valley a logit model was used to examine the effects of geographic distance on respondents willingness to pay for each of the three programs results indicate that distance affected wtp for two of the three programs wetlands habitat and wildlife and the wildlife contamination control programs we calculate the underestimate in benefits if the geographic extent of the public good market is arbitrarily limited to one political jurisdiction

complements substitutes budget constraints and valuation this study employs a multi program contingent valuation cvm design tosimultaneously assess the value of three ecosystem conservation programsin alberta canada the design is different from most other cvm designsand has several different features including the natural incorporation ofdirect reminders of substitute complementary programs and budgetconstraints in contrast to the findings of other studies two of the environmentalprograms appear to be complements and other combinations of the programssuggest an absence of substitution effects the multi program model ismore informative and robust in terms of theoretical validity and expectedrelationships with demographic and recreational characteristics of therespondents

directional heterogeneity in distance profiles in hedonic property value models abstract in environmental economics hedonic property value hpv models have often employed distance from a localized environmental disamenity as a proxy for perceived risk the magnitude of a distance effect on housing prices however may depend upon the direction in which it is being measured we generalize conventional distance models to allow for continuously varying directional effects by converting from cartesian to polar coordinates a simple empirical example for housing prices around woburn massachusetts between 1988 and 1996 illustrates how failure to allow for directional heterogeneity can obscure otherwise statistically significant distance effects in hpv

the speed of adjustment and production smoothing bayesian estimation abstract the models used for empirical studies of inventory behavior typically include the lagged stock of inventories as a result of the partial adjustment assumption and also exhibit serial correlation in the residuals some researchers suggested that the very low speed of adjustment of the actual inventories to their desired levels and also the lack of empirical support for the production smoothing hypothesis may be the results of applying inappropriate estimation methods to the data recently a bayesian estimator that applies to models containing both lagged dependent variables and autocorrelated disturbances was developed in this paper we examine the empirical evidence on the speed of adjustment of inventories to their desired levels and the degree to which firms smooth production by applying this new estimation method to monthly industry data the results show that the low speeds of adjustment reported in the literature as well as the low degree or lack of production smoothing also reported in the literature may indeed be artifacts of the estimation procedures used

optimal and competitive assortments with endogenous pricing under hierarchical consumer choice models this paper studies assortment planning and pricing for a product category with heterogeneous product types from two brands we model consumer choice using the nested multinomial logit framework with two different hierarchical structures a brand primary model in which consumers choose a brand first then a product type in the chosen brand and a type primary model in which consumers choose a product type first then a brand within that product type we consider a centralized regime that finds the optimal solution for the whole category and a decentralized regime that finds a competitive equilibrium between two brands we find that optimal and competitive assortments and prices have quite distinctive properties across different models specifically with the brand primary model both the optimal and the competitive assortments for each brand consist of the most popular product types from the brand with the type primary choice model the optimal and the competitive assortments for each brand may not always consist of the most popular product types of the brand instead the overall assortment in the category consists of a set of most popular product types the price of a product under the centralized regime can be characterized by a sum of a markup that is constant across all products and brands its procurement cost and its marginal operational cost implying a lower price for more popular products the markup may be different for each brand and product type under the decentralized regime implying a higher price for brands with a larger market share these properties of the assortments and prices can be used as effective guidelines for managers to identify and price the best assortments and to rule out nonoptimal assortments our results suggest that to offer the right set of products and prices category and or brand managers should create an assortment planning process that is aligned with the hierarchical choice process consumers commonly follow to make purchasing decisions this paper was accepted by pradeep chintagunta and preyas desai special issue editors this paper was accepted by pradeep chintagunta and preyas desai special issue editors

assortment optimization under variants of the nested logit model we study a class of assortment optimization problems where customers choose among the offered products according to the nested logit model there is a fixed revenue associated with each product the objective is to find an assortment of products to offer so as to maximize the expected revenue per customer we show that the problem is polynomially solvable when the nest dissimilarity parameters of the choice model are less than one and the customers always make a purchase within the selected nest relaxing either of these assumptions renders the problem np hard to deal with the np hard cases we develop parsimonious collections of candidate assortments with worst case performance guarantees we also formulate a convex program whose optimal objective value is an upper bound on the optimal expected revenue thus we can compare the expected revenue provided by an assortment with the upper bound on the optimal expected revenue to get a feel for the optimality gap of the assortment by using this approach our computational experiments test the performance of the parsimonious collections of candidate assortments that we develop

the variability of aggregate demand with s s inventory policies this paper develops a general theory of the aggregate implications of s s inventory policies it is shown that s s policies add to the variability of demand with the variance of orders exceeding the variance of sales overall the s s theory contradicts the widely held notion that retail inventories act as a buffer protecting manufacturers from fluctuating sales in 1951 arrow harris and marschak 3 introduced the s s form of inventory policy the policies are designed for retailers of finished goods who face economies of scale when placing orders with their suppliers to pursue an s s inventory policy the retailer establishes a lower stock point s and an upper stock point s no order is placed until inventories fall to s or below whereupon they are restored to the maximum of s a general proof of the optimality of these s s inventory policies was provided by scarf 13 at the microeconomic level the model has been extensively investigated formulae are available to compute optimal policies e g ehrhardt 6 and these policies are xidely used in industry e g schwartz ed 14 in addition the model has been extended to increasingly complex demand environments e g karlin and fabens 11 in contrast little is known about the macroeconomic implications of s s policies several recent papers have begun to correct this deficiency akerlof has suggested that pursuit of constant threshold money holding policies of the s s variety might be responsible for the observed low short run income elasticity of the demand for money akerlof 1 and akerlof and milbourne 2 in the operations research literature ehrhardt schultz and wagner 7 analyzed the demand environment of a wholesaler supplying several retailers they required that the distinct retailers have independent sales ruling out the analysis of common factors in sales finally simulation results of blinder 4 suggested a role for the s s model in understanding retail sector inventories however the theoretical difficulties with the model remained unresolved blinder commented if firms have a technology that makes the s s rule optimal aggregation across firms is inherently difficult indeed it is precisely this difficulty which has prevented the s s model from being used in empirical work to date blinder 4 p 459 in this paper we present a general theory of the aggregate implications of s s policies our central finding is that s s policies add to the variability of demand with the variance of orders exceeding the variance of sales this result holds even in the presence of common factors in retail sales in addition a close connection

network revenue management with inventory sensitive bid prices and customer choice we develop an approximate dynamic programming approach to network revenue management models with customer choice that approximates the value function of the markov decision process with a non linear function which is separable across resource inventory levels this approximation can exhibit significantly improved accuracy compared to currently available methods it further allows for arbitrary aggregation of inventory units and thereby reduction of computational workload yields upper bounds on the optimal expected revenue that are provably at least as tight as those obtained from previous approaches computational experiments for the multinomial logit choice model with distinct consideration sets show that policies derived from our approach can outperform some recently proposed alternatives and we demonstrate how aggregation can be used to balance solution quality and runtime

dynamic s s economies in this paper the authors provide a framework to study the aggregate dynamic behavior of an economy where individual units follow s s policies and are subject to aggregate and idiosyncratic shocks they characterize structural and stochastic heterogeneities that ensure convergence of the economy s aggregate to that of its stochastic frictionless counterpart determine the speed at which convergence takes place and describe the transitional dynamics of this economy they study the evolution of the economy s aggregate and the evolution of the difference between this aggregate and that of the difference between this aggregate and that of an economy without microeconomic friction where the latter pertains to a situation where individual units adjust with no delay to all shocks copyright 1991 by the econometric society

revenue management under a general discrete choice model of consumer behavior customer choice behavior such as buy up and buy down is an important phenomenon in a wide range of revenue management contexts yet most revenue management methodologies ignore this phenomenon or at best approximate it in a heuristic way in this paper we provide an exact and quite general analysis of this problem specifically we analyze a single leg reserve management problem in which the buyers choice behavior is modeled explicitly the choice model is very general simply specifying the probability of purchase for each fare product as a function of the set of fare products offered the control problem is to decide which subset of fare products to offer at each point in time we show that the optimal policy for this problem has a quite simple form namely it consists of identifying an ordered family of efficient subsets s 1 s m and at each point in time opening one of these sets s k where the optimal index k is increasing in the remaining capacity x and decreasing in the remaining time that is the more capacity or less time available the further the optimal set is along this sequence we also show that the optimal policy is a nested allocation policy if and only if the sequence of efficient sets is nested that is s 1 s 2 s m moreover we give a characterization of when nesting by fare order is optimal we also develop an estimation procedure for this setting based on the expectation maximization em method that jointly estimates arrival rates and choice model parameters when no purchase outcomes are unobservable numerical results are given to illustrate both the model and estimation procedure

substitution effects and spatial preference heterogeneity in single and multiple site choice experiments a novel discrete choice experiment dce design allows testing of substitution effects based on the framing of and distances to substitute sites the same ecosystem services and biodiversity provided at different sites are valued independently in single site dces and simultaneously in a multiple site dce using an identical experimental design site specific utility functions are estimated with and without controlling for spatial preference heterogeneity framing choices as alternative projects at single or multiple sites significantly influences substitutability between sites choice behavior and welfare estimates distance decay displays significant heterogeneity in different directions from the valued sites and between urban and rural areas

directional heterogeneity in wtp models for environmental valuation many studies in the stated preference literature on environmental valuation do not include the effects of substitutes and distance in willingness to pay wtp models in spite of the relevance of these effects in aggregation and benefit transfer heterogeneity in the availability of substitutes over space may cause multidirectional distance effects in wtp as a result disregarding this spatial heterogeneity may lead to biased estimators of the distance effect and associated wtp values cameron 2006 in this paper we demonstrate that distance decay is subject to significant directional effects which tend to be related to differences in the availability of substitutes across the study area we apply a straightforward methodology to account for such spatial heterogeneity in choice experiments and assess the effect on wtp for improvements in ecosystem services in a lake district we model distance decay effects whilst controlling for heterogeneity between users and non users and non use related wtp reasons the directional effects result in significantly different wtp estimates different market sizes reflecting the population with positive wtp and differences in total wtp up to 32

the context for substitutes in cvm studies some empirical observations abstract the purpose of this paper is to report results from a set of experiments that provide data to test the noaa 13 panel recommendation that subjects be reminded of budgetary substitutes when providing values the results suggest that simply reminding subjects of alternative environmental goods does not affect the distribution of values for a specific good such values are affected however whenever subjects simultaneously value alternative goods

on the relationship between inventory costs and variety benefits in retailassortments 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

effects on welfare measures of alternative means of accounting for preference heterogeneity in recreational demand models multiattribute revealed preference data are used to investigate heterogeneity in a sample of kayakers for a panel of whitewater sites in ireland this article focuses on a comparison of preference heterogeneity using a random parameter logit model with correlated tastes and a latent class model in terms of the implications for welfare measures of environmental quality and site access changes recreationalists skill levels are found to affect preferences in both approaches statistics for the estimated distribution of welfare changes for the average respondent are computed for changes in site attributes but contrary to previous work these are found to be of similar magnitude

the production smoothing model is alive and well abstract monthly data in physical units for seven industries are used to examine the production smoothing hypothesis the results strongly support this hypothesis significant effects of expected future sales on current production are found for four industries and the estimated decision equations for all seven industries imply production smoothing behavior the previous negative results appear to be due to the use of data biased against the hypothesis the shipments and inventory data of the department of commerce the paper also shows that sensible results can be obtained from estimating approximations to decision equations as opposed to estimating euler equations

a multiproduct dynamic pricing problem and its applications to network yield management a firm has inventories of a set of components that are used to produce a set of products there is a finite horizon over which the firm can sell its products demand for each product is a stochastic point process with an intensity that is a function of the vector of prices for the products and the time at which these prices are offered the problem is to price the finished products so as to maximize total expected revenue over the finite sales horizon an upper bound on the optimal expected revenue is established by analyzing a deterministic version of the problem the solution to the deterministic problem suggests two heuristics for the stochastic problem that are shown to be asymptotically optimal as the expected sales volume tends to infinity several applications of the model to network yield management are given numerical examples illustrate both the range of problems that can be modeled under this framework and the effectiveness of the proposed heuristics the results provide several fundamental insights into the performance of yield management systems

technical note pricing under the nested attraction model with a multistage choice structure we develop a solution approach to the centralized pricing problem of a nested attraction model with a multistage tree structure we identify conditions under which the optimal solution can be uniquely determined and we characterize the optimal solution as a fixed point of a single variable in the special case of a multistage nested logit model we show the impact of asymmetry in price sensitivity and adjustment index also known as the dissimilarity index and we derive a closed form solution when the tree structure is symmetric many existing results in the literature regarding the single or two stage nested attraction model are shown to be special cases of the results we have derived we show that the equal markup property which holds for the single stage logit model with symmetric price sensitivity in general does not hold for products that do not share the same immediate parent node in the nested choice structure even when price sensitivities are the same for all products

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

the d level nested logit model assortment and price optimization problems we consider assortment and price optimization problems under the d level nested logit model in the assortment optimization problem the goal is to find the revenue maximizing assortment of products to offer when the prices of the products are fixed using a novel formulation of the d level nested logit model as a tree of depth d we provide an efficient algorithm to find the optimal assortment for a d level nested logit model with n products the algorithm runs in o d n log n time in the price optimization problem the goal is to find the revenue maximizing prices for the products when the assortment of offered products is fixed although the expected revenue is not concave in the product prices we develop an iterative algorithm that generates a sequence of prices converging to a stationary point numerical experiments show that our method converges faster than gradient based methods by many orders of magnitude in addition to providing solutions for the assortment and price optimization problems

incentive compatibility tests of choice experiment value elicitation questions abstract this paper uses laboratory experiments with induced values to address fundamental issues related to the incentive compatibility of choice experiment value elicitation questions in particular we compare two versus three option choice sets and the effect of using alternative provision rules including one where the outcome is influenced by both participant and regulator votes we find the overall proportion of choices that are inconsistent with induced preferences is rather low however there are more deviations from induced preferences for two option choice sets and for alternatives to a simple plurality vote implementation rule a multinomial probit analysis of choices in tandem with a mixed logit welfare analysis suggests there is a statistically significant but modest degree of bias towards selecting the status quo option