Pricing optimization of product line with value-added services considering consumer choice behavior

Abstract

ABSTRACT The global economy is transitioning from product economy to service economy, and the optimization of product line with value-added services is one of the important issues faced by enterprises. Therefore, this paper studies the pricing optimization of product line with value-added services considering consumer choice behavior. First, we apply the multinomial logit (MNL) model to simulate consumer choice behavior, and establish a MNL-based product line pricing optimization model considering value-added services. Then, the optimal pricing strategies for products and services are solved for three different scenarios: single product with service, homogeneous products with services, and heterogeneous products with services. Finally, through numerical experiments, we analyze the changing trends of the optimal pricing, market share and profit of products line with value-added services with some impact factors, such as product quality, service level, consumer sensitivity, and number of products under three different scenarios. We also obtain some managerial implications when an enterprise develops product line with value-added service.