Title: Learning Customer Preferences from Bundle Sales Data
Abstract: Product bundling is a common selling mechanism used in online retailing. To set profitable bundle prices, the seller needs to learn consumer preferences from the transaction data. When customers purchase bundles or multiple products, classical methods such as discrete choice models cannot be used to estimate customers’ valuations. In this paper, we propose an approach to learn the distribution of consumers’ valuations toward the products using bundle sales data. The approach reduces it to an estimation problem where the samples are censored by polyhedral regions. Using the EM algorithm and Monte Carlo simulation, our approach can recover the distribution of consumers’ valuations. The framework allows for unobserved no-purchases and clustered market segments. We provide theoretical results on the identifiability of the probability model and the convergence of the EM algorithm. The performance of the approach is also demonstrated numerically.
Link: https://arxiv.org/abs/2209.04942
Bio: Setareh is a Ph.D. candidate at Rotman School of Management. Her research applies techniques such as network games, queueing, newsvendor models, learning, statistics, and data-driven algorithms to solve socially responsible and revenue management operations problems.