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Convex Optimization for Bundle Size Pricing Problem

Published: 13 July 2020 Publication History

Abstract

We study the bundle size pricing (BSP) problem where a monopolist sells bundles of products to customers, and the price of each bundle depends only on the size (number of items) of the bundle. Although this pricing mechanism is attractive in practice, finding optimal bundle prices is difficult since it involves characterizing distributions of the maximum partial sums of order statistics. In this paper, we propose to solve the BSP problem under a class of choice model using only the first and second moments of customer valuations. We show that the BSP problem under this model is convex and can be efficiently solved using off-the-shelf solvers. Our approach is flexible in optimizing any given bundle sizes, and numerical results show that it performs very well compared with state-of-the-art heuristics.

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  • (2024)Customized Bundle Pricing for Heterogeneous ProductsSSRN Electronic Journal10.2139/ssrn.4733821Online publication date: 2024
  • (2023)Optimal sales strategy of bundling products with extended warranties2023 5th International Conference on System Reliability and Safety Engineering (SRSE)10.1109/SRSE59585.2023.10336065(395-400)Online publication date: 20-Oct-2023

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cover image ACM Conferences
EC '20: Proceedings of the 21st ACM Conference on Economics and Computation
July 2020
937 pages
ISBN:9781450379755
DOI:10.1145/3391403
Permission to make digital or hard copies of part or all of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for third-party components of this work must be honored. For all other uses, contact the Owner/Author.

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Association for Computing Machinery

New York, NY, United States

Publication History

Published: 13 July 2020

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EC '20
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EC '20: The 21st ACM Conference on Economics and Computation
July 13 - 17, 2020
Virtual Event, Hungary

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Overall Acceptance Rate 664 of 2,389 submissions, 28%

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The 25th ACM Conference on Economics and Computation
July 7 - 11, 2025
Stanford , CA , USA

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Cited By

View all
  • (2024)Customized Bundle Pricing for Heterogeneous ProductsSSRN Electronic Journal10.2139/ssrn.4733821Online publication date: 2024
  • (2023)Optimal sales strategy of bundling products with extended warranties2023 5th International Conference on System Reliability and Safety Engineering (SRSE)10.1109/SRSE59585.2023.10336065(395-400)Online publication date: 20-Oct-2023

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