- June 22, 2007 - 17:00
- ZLC, Lecture Room A1
Alex Grasas, PhD Candidate
Department of Industrial and Systems Engineering, University of Florida
“Product Assortment and Return Policy”
Recent changes in consumer expectations necessitate companies to expand their product portfolio and offer fexible product return policies. To explore the interaction between product variety and return policy of a firm, we consider a firm operating under make-to-order regime that allows the customers to return products if they are unsatisfied with them. The firm’s decisions involve specifying the number of variants to include in the product assortment and determining the optimal stock levels for each product variant. Using a nested multinomial logit model to characterize customers purchase and return decisions, we model the profit maximization problem of the firm. We characterize the structure of the optimal assortment decision and provide insights on how the amount of refund offered to the customers impact the profit and the optimal set of products offered by the firm.