Consumer Choice Modelling in Product Line Pricing: Reservation Prices and Discrete Choice Theory

Conference paper
Part of the Operations Research Proceedings book series (ORP)

Abstract

In the literature on product line pricing, consumer choice is often modelled using the max-surplus choice rule. In terms of this concept, consumer preferences are represented by so-called reservation prices and the deterministic decision rule is to choose the product that provides the highest positive surplus. However, the distribution of the reservation prices often seems somewhat arbitrary. In this paper, we demonstrate how reservation prices can be obtained using discrete choice analysis and that these two concepts are not as different as often perceived in the literature. A small example illustrates this approach, using data from a discrete choice model taken from the literature.

Keywords

Discrete Choice Reservation Price Choice Probability Discrete Choice Model Participation Constraint 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Department of Analytics & OptimizationUniversity of AugsburgAugsburgGermany

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