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

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.

• 저널Management Science · 45(11) · 1496–1509
• 토픽Consumer Market Behavior and Pricing · Marketing
• DOI10.1287/mnsc.45.11.1496
• 저자Garrett van Ryzin, Siddharth Mahajan