Joint Optimization of Product Price, Display Orientation and Shelf-Space Allocation in Retail Category Management

Abstract

We develop a model that jointly optimizes a retailer's decisions for product prices, display facing areas, display orientations and shelf-space locations in a product category. Unlike the existing shelf-space allocation models that typically consider only the width of display shelves, our model considers both the width and height of each shelf, allowing products to be stacked. Furthermore, as demand is influenced by each product's two-dimensional facing area, we consider multiple product orientations that capture three-dimensional product packaging characteristics. that enables our model to not only treat shelf locations as decision variables, but also retailers' stacking patterns in terms of product display areas and multiple display orientations. Further, unlike the existing studies which consider a retailer's shelf-space allocation decisions independent of its product pricing decisions, our model allows joint decisions on both and captures cross-product interactions in demand through prices. We show how a branch-and-bound based MINLP algorithm can be used to implement our optimization model in a fast and practical way. © 2010 New York University.

Department(s)

Engineering Management and Systems Engineering

Comments

National Science Foundation, Grant None

Keywords and Phrases

MINLP model; Pricing and revenue management; Retail category management; Shelf-space allocation

International Standard Serial Number (ISSN)

0022-4359

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2024 Elsevier, All rights reserved.

Publication Date

01 Jun 2010

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