Customer Choice Models in Emerging Retail Markets


Bernstein, Fernando

Guo, Yuan




Business Administration


In this dissertaion we discuss customer choice and company decisions in three emerging retail settings. We first consider subscription box services in which a provider selects the assortment of products to include in the box by taking into account the customer's preferences. Customers interested in purchasing a product choose between engaging in searching physical stores or subscribing to a box delivery service. We study the subscription box company's problem of selecting the optimal contents of the box to maximize expected revenue (by driving demand from customers). We model the interaction between customer search and subscription by applying a cross-nested logit framework that correlates the contents in the box with the products available at the stores. We find that if a preview of the box is available, for customers with intermediate values of the search cost, it may be optimal to include a so-called utility loss leader, i.e., a product with relatively low valuation, to entice customers to subscribe to the box delivery service and therefore increase the likelihood of a sale. Next, we study companies' problem selling in social media, where brands attach product tags directly in their posts and users can complete their purchase by clicking on these tags. We propose a novel choice model that captures the users' impulsive behavior and limited attention span while browsing products in social media platforms. We consider a seller's product display problem on a product page and examine different strategies to sell through social media. We find that, depending on the product preferences and the users' pattern of attention decay, the optimal display set can have different structure. Finally, we discuss the fashion retailer's production problem selling in a market where a secondhand platform collects old clothes from customers and resells them. We construct a customer decision model that captures their consumption of new and/or used products under transitioning fashion trends over time. We find that if the platform operates independently and the hassle cost related to buying and selling used goods is high, the retailer's optimal production decision will not be affected by the existence of the secondhand market.



Business administration


Customer Choice Models in Emerging Retail Markets