Pricing Optimization of Products and Value-added Services based on Multinomial Logit Model

Abstract

The quality of durable consumer goods is more and more concerned by consumers, and the development of value-added services to improve product quality has become an important way for enterprises to obtain profits. Based on the multinomial logit (MNL) model, this paper establishes a product line optimization model considering value-added services, which helps find the optimal pricing, market share and maximum profit. Through numerical experiments, the effects of the ratio of service price to product price, product quality, service quality, utility loss caused by product failure on the optimal solutions are studied. The study finds that when developing a product line, increasing the relative price of services while reducing product pricing is the optimal strategy. The research results can provide theoretical basis and decision support for the pricing of durable consumer goods and value-added services.