The Approximability of Assortment Optimization Under Ranking Preferences
20 Pages Posted: 3 Jun 2015 Last revised: 2 Feb 2018
Date Written: June 1, 2015
The main contribution of this paper is to provide best-possible approximability bounds for assortment planning under a general choice model, where customer choices are modeled through an arbitrary distribution over ranked lists of their preferred products, subsuming most random utility choice models of interest. From a technical perspective, we show how to relate this optimization problem to the computational task of detecting large independent sets in graphs, allowing us to argue that general ranking preferences are extremely hard to approximate with respect to various problem parameters. These findings are complemented by a number of approximation algorithms that attain essentially best-possible factors, proving that our hardness results are tight up to lower-order terms. Surprisingly, our results imply that a simple and widely studied policy, known as revenue-ordered assortments, achieves the best possible performance guarantee with respect to the price parameters.
Keywords: Assortment optimization, choice models, hardness of approximation, independent set, approximation algorithms
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