Abstract

Product pricing is a revenue management strategy that facilitates the determination of the prices of a series of products by understanding customer's purchase behavior to optimize the firm's revenue. It is worth mentioning that contributions in the current literature mainly focuses on a single purchasing behavior of the customer either by using utility or rank. To address this problem, we propose a product pricing model incorporating both the customer's utility and the rank. We present a bilevel programming formulation to model this problem and present its corresponding single level formulation. We present two algorithms to assess the validity of the single level formulation and obtain high-quality solutions in reasonable CPU times. Results of computational experiments are presented to assess the performance
of the proposed algorithms, in comparison with the single level formulation by solving it with a general purpose solver.