Hybrid Search and Choice Framework: Modeling, Optimization and Estimation
Carey Business School
John Hopkins University
In this paper we propose a hybrid model to study sequential and simultaneous choice behavior in the presence of search cost. After examining all products in an assortment, a rational consumer considers whether to visit another assortment. Switching from one assortment to another often incurs a search cost that is often related to transportation expense or time. We combine the classic sequential search model with the famous simultaneous discrete choice model, and develop a unified framework to investigate the effects of search cost on the simultaneous and sequential choice behavior. We further consider the associated operations problems including price optimization and competition, assortment planning, search cost management and model estimation. Our study shows that the hybrid search and choice model can improve the goodness-of-fit and prediction accuracy for consumer choice, sales and revenue in the shopping scenarios with multiple stores in different locations. Failure to account for the features in consumer search and choice may lead to substantial losses in operations management.
Dr. Ruxian Wang is currently an associate professor at Johns Hopkins University, Carey Business School. Before returning to academia, he worked in Hewlett-Packard Company for several years as a research scientist. He received Ph.D. from Columbia University. His research and teaching interests include operations management, revenue management, pricing, discrete choice models, data-driven decision making. His articles appeared in several flagship journals in his field, such as Management Science, Manufacturing & Service Operations Management, Operations Research, Production and Operations Management. He received Meritorious Service Awards from Management Science, Manufacturing & Service Operations Management, and Outstanding Service Award from the Production and Operations Management Society (POMS). He is currently serving the POM journal as a senior editor.
The seminar series’ website: Management Sciences seminars