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Keywords: Integrated Production-Marketing, Retail Management, Joint Inventory and Pricing, MNL Choice Model, Multi-Item Newsvendor.
We consider a retailer's product line with consumers arriving according to a Poisson process. Consumers act to maximize their surplus based on a multinomial logit choice model. We develop an integrated marketing-production model. Our objective is to jointly determine the optimal prices and inventory levels for items in the product line so as to maximize the retailer's profit. In addition, we analyze the variety aspect of the problem by determining the optimal assortment of items (i.e., which items to...