The integrated size and price optimization problem

Miriam Kiessling; Sascha Kurz; Jörg Rambau

doi:10.3934/naco.2012.2.669

Article Contents

2012, Volume 2, Issue 4: 669-693. Doi: 10.3934/naco.2012.2.669

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The integrated size and price optimization problem

1.
Universität Bayreuth, 95440 Bayreuth
2.
Universität Bayreuth, 95440 Bayreuth

Received: November 30, 2011

Revised: September 30, 2012

Published: October 2012

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Abstract

We present the Integrated Size and Price Optimization Problem (ISPO) for a fashion discounter with many branches. Based on a two-stage stochastic programming model with recourse, we develop an exact algorithm and a production-compliant heuristic that produces small optimality gaps. In a field study we show that a distribution of supply over branches and sizes based on ISPO solutions is significantly better than a one-stage optimization of the distribution ignoring the possibility of optimal pricing.

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Mathematics Subject Classification: Primary: 90B90, Secondary: 90B05.

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