Patent ID: 7921061

Claim:
A computer-implemented method for simultaneously pricing an item in a product hierarchy and allocating assets in a supply chain, the method comprising: determining a set of price points for the item in the product hierarchy; determining a value corresponding to a price elasticity of the item; determining a value corresponding to a price elasticity of a correlated item; prior to determining a set of expected demand values, determining a non-linear demand model based on a baseline demand of the item, the price elasticity of the item, a cross demand of the item created by the price elasticity of the correlated item, and a demand of the item created by a marketing instrument; transforming the non-linear demand model into a linear demand model; determining, by at least one processor associated with a computer system, a set of expected demand values for each price point for the item using the linear demand model, the value corresponding to the price elasticity of the item, the value corresponding to the price elasticity of the correlated item, and the set of price points, the set of expected demand values able to model demand uncertainty for each price point; determining a supply-side constraint which models inventory, replenishment, and capacities associated with replenishment of the product hierarchy; determining a joining constraint which requires that a selected set of expected demand values be equal to a net planned supply of the item; determining a demand-side constraint; determining an objective function, by the at least one processor associated with the computer system, to maximize revenue and minimize costs simultaneously based on the set of price points for the item, the set of expected demand values for the item, and subject to the supply-side constraint, the joining constraint, and the demand-side constraint; and providing an optimal price profile for the item based on the objective function.